Local backups still work fine, you just do it in Finder now instead of iTunes. Not sure what the situation is for Windows users.

As far as comparing prices, yes, a bare hard drive is cheaper but I'm paying for that storage with services and backups attached to it. A hard drive won't automatically sync photos between my phone and my computer, and I'm more likely to have that hard drive fail than I am to lose iCloud.

Replacing iCloud storage with a big hard drive is a bit like replacing a car with a motorcycle. Yeah you can buy way more acceleration for less money, but good luck moving your furniture.