They're the digital equivalent of a library. My local library lends out in-copyright music and films.
The real problem here however is copyright. There should be a balance between creators, publishers, readers, libraries, fair use, and remixers. But the balance is all out of whack with the publishers making most of the money and everyone else including most creators getting stiffed.
Digital equivalents to libraries typically have a fixed number of copies of a digital book paired with DRM such that the user can only read them while checked out. That is very different from how the internet archive works.
Digital is fundamentally different because everything can be copied infinitely. Any model that doesn't accept this basic fact is broken. Luckily there are plenty of other models that could be used, such as compulsory licensing or flat fees that are divided amongst creators. The publishers of course are not interested in that.
Except for the DRM, that is exactly how the internet archive works for content that is still under copyright. However, for libraries, they often have a limited number of borrows per book (enforced with the DRM), and they are effectively renting the book, not owning it. Which gets back to the imbalance of copyright law and enforcement.