Here the local legal counsel says your right to the music follows the ownership of the CD. It's like a certificate. You may disagree but that's the breaks.
As to where to store such, cloud is flawed but attractive. Read http://news.cnet.com/8301-17852_3-57486930-71/woz-the-cloud-is-a-nightmare/ and decide if you can live with someone else deciding on the fate of the files. You gave up control and some are OK with that.
As to other storage, if it's something I can't lose I have no less than 3 copies in different places.
What about iTunes. That's an application and not "storage" or backup.
I am downsizing and want to get rid of my CDs but I still want to keep the music. I currently have a desktop with a CD reader but I plan to get rid of that too. Should I copy my CDs to an external hard drive, a thumb drive or to a cloud? I have about 60-70 CDs. If I copy to a thumb drive, what size storage do I need? If I copy to a cloud, is one service better than the others? Is cloud storage free? What about iTunes? Is there anything else I need to get started? Any software? Would it be in a MP3 format? Any advice would be appreciated.