The NSW government admits its music festival "self-assessment matrix" has caused "confusion and misunderstanding" in the entertainment industry after hundreds of musicians and promoters launched a campaign against the state's "war on music and culture".
Almost 33,800 people - including many prominent bands and music festival organisers - have signed a petition letter that warns "music lovers, your music is under attack" from Premier Gladys Berejiklian.
"Overbearing regulation, exorbitant police bills, a lack of respect for NSW businesses, and very little recognition of the significant positive impacts of music on our communities is forcing music out of NSW," the open letter reads.
"The state government has declared a war on music and culture in NSW, proclaiming that music and music festivals are high-risk activities."
The premier, earlier this week, said "high-risk" festivals would need to improve safety standards to satisfy a new licensing system after five fatal drug overdoses in as many months.
The petition letter countered by demanding a music roundtable to review regulation affecting live music, transparency on policing and medical bills, collaboration with government to keep festivals safe.
Byron Bay Bluesfest organisers said they feared they would have to leave NSW because their festival could be classified as "high risk" under Ms Berejiklian's scheme.
The government, later on Tuesday, sought to reassure operators only festivals with "a poor track record and/or heightened risk" would face increased scrutiny.
Festivals with favourable histories will likely be deemed low risk and not need to pay extra to meet new police or health requirements.
"To be clear, if you are a good operator with a good track record, the new licensing scheme will not unduly impact you," the government said in a statement on Wednesday.
"We appreciate there has been some confusion and misunderstanding about the way the new scheme will operate, particularly in relation to the initial self-assessment matrix that was circulated to some festival organisers."
The government says it is reviewing the tool.
The statement did not reveal the way the high/low risk rating would be calculated, however.
A rally linked to the petition letter, also entitled "Don't kill live music", will take place in Sydney's Hyde Park on February 21.
More than 5000 people have indicated they will attend the rally so far.
The debate comes days after Mountain Sounds Festival, also a signatory, cancelled its event after being slugged with a last-minute $200,000 policing bill.
Ms Berejiklian, however, has argued the festival didn't sell as many tickets as they had hoped to.
Australian Associated Press