"No new events please, support the existing events that are struggling," Port Fairy Folk Festival director Justin Rudge told a parliamentary hearing into live music in Canberra.
Government backing of for-profit concerts that only last a year or two had increased competition for events such as the Victorian folk festival, he said.
The Port Fairy event has been running 48 years and in 2024 $3.4 million was spent in the town, but costs have skyrocketed: insurance has increased by a third, artist costs by 65 per cent and liquor licence application costs have doubled.
"The town has thrived as a result of the folk festival, but the festival is struggling, we are in hard times," Rudge said.
With "pretty awful" mobile coverage in the area, the festival pays Telstra $15,000 for extra phone infrastructure as a safety measure during the event, but these costs have recently gone up 70 per cent, he said.
The festival supports about a dozen other live music events by paying for travel and transport for performers who go on to tour other towns, Rudge said.
One of these is the Cobargo Folk Festival, whose director Zena Armstrong is also contending with increased costs in a crowded market.
She called on government to fund community festivals as well as providing direct funding for musicians, rather than backing new events.
"We can't compete against the fly-in, fly-out festivals," Armstrong said.
"They take our volunteers, they take our audiences, they take our dollars and we love them but it's challenge for us."
Events such as Cobargo, which attracts about 7000 people to the NSW town, are vital to help Australian musicians get a start in the industry, she said.
"Every musician in Australia starts from a grassroots level, even John Butler and Daniel Champagne," Armstrong said.
Queensland's Caloundra Music Festival recently became the latest in a string of cancellations that includes big events such as Splendour in the Grass, Groovin' the Moo and Falls Festival.
In April a separate senate inquiry into the national cultural policy also scrutinised the live music industry, and was told operational costs had spiked by almost half, while insurance premiums had risen tenfold.
The federal budget in May allocated $8.6 million to support live music venues and festivals.
The average cost of running a music festival is $3.9 million, according to Creative Australia research, but 35 per cent of events lose money, with a median deficit of $470,000.
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