One of the arguments in favor of digital distribution is that you don't have to keep track of a physical medium. There's no disc to lose or get damaged. However, the digital copy is stored on a physical storage device — typically, a magnetic high density storage device ("hard drive" for you laymen). In some cases, you have the option to make a backup to a CD or some other storage medium (which brings you right back to the "disc to lose"), but otherwise, you're at the mercy of the selling company and its continued existence, and any promise they might have of letting you re-download a game you purchased.
One of Xbox Live Arcade's selling points has been that you can do just that — re-download anything you've ever bought at any time. It's one of the reasons they've insisted you don't need anything larger than a 20GB (or 60GB or 120GB) hard drive, because you can always delete something and re-download it later for no charge.
For the most part, that's true. And that may still be Microsoft's intent. But you know what they say about intentions — the road to hell is paved with them.
First, Yaris disappeared. Understandably, no one got very upset. Not only was it a horrible game, it was also free, so no money was lost.
Then went Lost Cities, and now go Double Dragon and SpeedBall 2. These are games people are actually paying for, and now, due to expiring licensing deals or other corporate politics, they are gone. The "delete and re-download" promise is broken. If you don't have a memory card or an unsupported device for extracting (and later re-writing) data for your storage device, you can't make a backup onto a PC or a CD-ROM or other offline storage. Even worse, if your console is repaired or replaced, you can't use the license transfer tool and re-download licenses for content that no longer exists, meaning the one copy you hopefully still have is only good for that one gamertag to play while connected to Live, until that copy fails and/or that account is suspended or terminated. Then, that's it, it's gone forever.
So to what high-profile Arcade game does this need to happen before people take notice? What if Namco Bandai went into bankruptcy or its IP was purchased by another company, which forced its titles, including Pac-Man C.E., to get delisted from the Xbox Live Arcade?
At least in that case, I'd be safe. I could still play it. I have it on the Namco Museum Virtual Arcade. It's a shiny disc that I can put into any Xbox 360 at any time, online or offline, and play it signed in under any account.