Austin, Texas - Lou Reed is decidedly frosty on the notion of digital music. A classic audiophile. "Technology is making it easier to make things worse," he proclaimed during his keynote interview on Thursday at SXSW, with veteran music producer and 20-year collaborator Hal Willner. "If you are one of those people like me who like 'good sound,' you need good speakers, a good stereo, and (as an artist) your price of recording goes up, because you need a good mic, good cables...If you don't like good sound, go with MP3."

"People have to demand a higher standard," Reed says of digital music consumers. "The other side may say that's elitist, that only people with money can afford a good sound. With MP3, you get very bad sound, but the trade off is there's a lot of it in front of you."

"It's like YouTube. Here's your movie reduced to the size of a postage stamp," remarked Willner. "Here's your song reduced to a pin drop," added Reed. He went on to give the example of when higher-fidelity MP3 copies of a song come out, and all of a sudden you can hear instruments that weren't there before.

Reed wasn't universally opposed to the use of technology in the creation of music, saying he's been amazed by what some young composers have done with computers, for instance taking his guitar-laden "Metal Machine Music" and transcribing it for an orchestra, complete with the guitar harmonic parts. He also plugged the young composer Nico Muhly, a protégé of sorts of minimalist composer Philip Glass who was recently profiled in the New Yorker.

When asked by an audience member about what new music he found interesting, Reed mentioned artists including Melt Banana, Holy Fuck ("or is it Holy Shit?") and Dr. Dog.

Lou Reed's advice to young musicians: It's the publishing, stupid.

"When they (the record labels) dangle it (the record deal) in front of you, they will always say they want the publishing. You must always say: No. Don't let them cross-collateralize."

Lou is at the festival this year in support of Oscar-nominated ("The Diving Bell and the Butterfly") director Julian Schnabel's new film, which documents a recent performance of his 1973 album, "Berlin." The album got an overwhelmingly negative response from critics (Lou: "Worst album ever made"; "Most depressing album ever made") and was actually used by Reed's record label in court against him, to show "what an artist will do with no supervision." Julian Schnabel, however, told Lou he believed it to be the most romantic record ever made. Lou expanded on this idea, comparing it to Othello and Desdemona -- romantic in the sense of how jealous he is, "to feel attachment that turns into physical abuse because you love the person so much."

Reed still seems genuinely hurt that the world seemingly dismissed this piece of his art, and spoke several times in an acerbic way about the world's reaction to the work, and his inability to wrap his head around it.

Schnabel's film, Lou Reed's Berlin, screened during the Film component of the three-headed festival, which also comprises an Interactive component in the days before the world-renowned Music extravaganza. The album was staged live just a handful of times, in front of a small audience in Brooklyn, at St. Anne's Church. Lou's backing band included the exquisite vocalist Antony Hegarty, who has since graduated to his own success with his band Antony & the Johnsons. Lou showed a clip from the film that included the song "Men of Good Fortune." Behind himself and the other musicians, against the back wall of the theatre, was projected grainy film shot by Schnabel's daughter, consisting of pans across old black and white photographs.

Of "Berlin," Lou said: "It was 1973, there were terrible things going on. Some of the same things are happening again right now... Do you notice the similarities?" Reed asked the audience, who answered affirmatively.

On Punk:
"Better to start when you're young, if you're sleeping on floors, sleeping in the subway, sleeping in movie theaters. When you get older, it's not as easy to do that."

"No R&B licks. No blues guitar licks. We're gonna do this 'other' kinda thing...Aggressive. Steel. Street. Action. All that young guy stuff. That's punk. It exists now, and it always will.

On Life:
"I have a BA in Dope ... but a Ph. D. in Soul."

-Mark Hefflinger