There is a story about Quantegy's (and analog's) demise at rollingstone.com. Lou Reed is sad to see it go:
A milestone in the history of recorded music was marked on New Year's Eve when Quantegy, the last company in the U.S. to manufacture the magnetic tape used for studio analog recording, shut its doors.
Analog recording has fallen by the wayside since the mid-Nineties, when faster, cheaper digital recording and editing programs such as Pro Tools became the norm. Still, die-hards -- including Neil Young, Jackson Browne and producer Rick Rubin -- swear by the natural sound of analog. "Digital has gotten really good, but it's never going to be analog," says Lou Reed. "People who want a vintage sound are going to have a problem."
...As the news spread, analog tape reels hit eBay, and tape vendors were besieged with phone calls. ATR Services, which makes and services analog gear, has plans to launch a line of tape by summer. "There's still a solid base of customers for analog," says Michael Spitz, ATR's owner. "But any company making it needs to realize it's not the de facto recording choice anymore."
I believe that there is a difference between analog and digital, though everything is converted to digital anyway, so the difference, while still evident, is not as pronounced. I think the people who are freaking out have probably just been confronted with their mortality.