I think it depends on the type of show, and on how it's done. Shows that are meant to be open-ended, and to run as long as TPTB can keep them going, benefit strongly from being episodic. Attempts at long arcs in those types of shows lead to continuity errors, constantly escalating stakes, and disappointing resolutions (looking at you, X-Files).

On the other hand, shows with planned, limited (or fairly limited) runs can do fantastic things with long arcs. A show like 'Breaking Bad' does not work as purely episodic fiction.

You know what show succeeded masterfully at balancing the two, though? Farscape. The three-part episodes were fucking legendary! And the overarching storylines were woven so well into the "adventure of the week" episodes. I think the writers of that show recognized something that many others don't: standalones allow for character- and relationship-building in a way that arcs often don't.