easola -
re your first paragraph - YES. If the service loses rights to an artistist's album, it is no longer available - whether previously downloaded and whether currently connected or not.
re your second paragraph: DOWNLOADED Spotify music files ARE stored on your local device. They just can't be played back independent of using the service's app located on your device.
I have large music libraries in both Spotify and Tidal. Not all the albums in these libraries are downloaded. To access all content in these libraries, I must have a live, real time, streaming connection to the service (in my case, either Spotify or Tidal) via their app.
ALAC (Apple Lossless Audio Codec) is not lossy (though compressed). The AAC (Advanced Audio Coding) format used for Apple iTunes Music service files is lossy and compressed.
Agree 100% w/gdnrbob - we are living in a Golden Age of music accessibility. Spotify (preferred for it's larger library and - to me - cleaner interface design) & Tidal (preferred for superior sound quality) are treasures and fantastic avenues for discovering new music. Still, if I find a gem that rewards repeated listening, I will purchase the CD and then rip to hard drive for playback through an Auralic Aries Mini. To my ear, this format is better than Spotify, Tidal or the CD.