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I'm guessing that Neil Young is referring to the boom in portable music players after the MP3 replaced bulkier CD players and concomitantly the cheap, inferior, mass produced earphones/buds included with many of them. Post MP3 generations of children growing up with the technology accepted that sound quality level as the norm and have adjusted their cost to benefit ratio expectations to it. It's evidenced in what they'll settle for at the concerts they go to. Likewise with downloading individual songs to MP3 rather than buying artists' entire albums which also helped support those large performing and recording ensembles. The advent of MP3 influenced many of the alternative reasons you gave. Neil young may not have articulated it well; but, when it comes to the music industry he's not a laughable novice even if he has become prone to exaggeration (e.g. "... practically unrecognizable.") in his old age.
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