They didn't encode/reencode anything with popularity>0.
What they are providing is the same as the available source.
They did reencode songs with popularity=0.
They are archiving what they could get from Spotify and in this case what they could get was encoded in a lossy format to begin with.
It doesn't get any "more" lossy over time just being stored as an .ogg
It's not the most welcoming read in terms of sci-fi but I love that book. That and its sequel (Echopraxia) do what sci-fi is supposed to do (make you think).