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University libraries all over the world would disagree, their archivists make very sure that digital journals are still available to their audience even if the subscription has expired. Access to digital content is a solved problem, even though Apple would have you believe otherwise.

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How does this work? Is it normal for university libraries to keep a huge secret backup collection of PDFs? What happens if the university chooses to discontinue its subscription, as opposed to the publisher going out of business?

Contracts stipulate that material that has been paid for remains available even after the subscription is cancelled, that's usual for publishers. There's also agreements that material is transferred to archive sites if a publisher goes out of business and finds no buyer.

I wouldn't know about ToU violations, universities routinely get banned from arXiv for weeks because CS departments hand out assignments to write a webcrawler - no clue what kind of grovelling is requited there, but it must be well ritualized now.

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