CEO cuts short address after audience member queries Pono’s cut of sales.

Neil Young arrived in Austin today to introduce his new high-quality digital music player and service to the SXSW audience, delivering a presentation that essentially attributed the entire collapse of the record industry and its affiliated businesses to the inferior MP3 format.

“We were selling shit,” he said, referring to MP3s. “They were buying wallpaper.”

He also suggested that MP3s have negatively impacted the music creation process. “It became beat heavy, it became right for what the media was for, what was selling it,” he said. “Clever, tricky, a lot of impressive things. For people like me it was like ‘Whoa… I don’t wanna do that.'”

A return to high-fidelity will save the flagging industry, reckons Young, and he’s got the device to do it in the shape of the Pono Player, which plays FLAC files at an upper limit of 192 kHz, and

But when the company’s CEO Jon Hamm took the stage for a Q&A session, things got awkward. As Billboard reports, a man in the audience asked, ‘What’s your cut?’, referring to the 30% cut that Apple takes on iTunes sales.

After a flustered moment, Hamm responded: “It surprises most people that everyone who buys music from the record labels pays exactly the same amount.”

Several audience members shouted, “What?!” before Young chipped in with, “That’s a delicate question, isn’t it?”

Hamm turned to the moderator and said “We can end it”, allowing the host to close the discussion for him.

Sounds like an uncomfortable ending for a talk that had until then been rather interesting – but if the CEO can’t provide an answer that even the notoriously secretive Apple would disclose, Pono might find it hard to seduce the majority of users who are quite content with their lower quality iPods.