It is often beneficial to understand what a command does, so let's break it down:
echo deb http://repository.spotify.com stable non-free | sudo tee /etc/apt/sources.list.d/sp
echo part simply writes everything up to the pipe symbol
| to the standard output, i.e the terminal. The pipe then takes this output (here
deb http://repository.spotify.com stable non-free) and gives it to
tee as input.
tee reads from standard input and writes it to a file. In your case the output of
echo is written to the file
/etc/apt/sources.list.d/sp, which is where the error is.
sudo in front of
tee is necessary to aquire root privileges, because only a user with root privileges is allowed to write to the directory
As a result of the typo, there is now a file
/etc/apt/sources.d/ - check this yourself via
ls /etc/apt/sources.list.d/. You can view it's content with e.g.
cat /etc/apt/sources.list.d/sp. According to
apt it is ignored, because is does not have the file extension
.list. Now it should be fairly obvious what to do: Give the file the proper name. Files are renamed aka. moved via the
sudo mv /etc/apt/sources.list.d/sp /etc/apt/sources.list.d/spotify.list
Convince yourself that now the file has the desired name.
sudo apt-get update again, the error should disappear.
As a general remark, whenever in doubt what a command does, it is often a good idea to consult the corresponding man page