The Byron Bay music festival has been Australia's largest for more than a decade and its cancellation due to poor ticket sales has sent shockwaves throughout the industry.

The line-up for the three-day festival, scheduled for July 19 to 21, was only announced a fortnight ago and expectations were high the event would succeed in the volatile market.

The line-up included pop princess Kylie Minogue, North American indie heavyweights Arcade Fire, US rapper Future, and featured a wealth of talent such as G Flip, Tash Sultana, Fontaines D.C, Tones and I and Hayden James.

Also scheduled to perform on day two were Rum Jungle, in what would have been the biggest moment in the four-piece's career.

"I'm absolutely gutted to hear the news," Rum Jungle frontman Ben McIntyre told the Newcastle Herald.

"It seems like so many amazing legacy festivals aren't able to go ahead and there just simply has to be something done about it.

"Splendour's a festival me and the lads love and have been dreaming about playing since we first started out and to have that somehow in our sights after all these years, it's a big hit to now not be able to play."

The cancellation of Splendour In The Grass follows the collapse of Newcastle's This That and Groovin' The Moo in the past six months due to poor ticket sales.

Rum Jungle had also been scheduled to play This That.

"I'm really hoping something turns around and they can get it back up and running real soon because we'll be the first to have our hands up to play," McIntryre said.

Only on Tuesday the NSW Government was spruiking the success of this month's Great Southern Nights initiative to promote more live music in the state.

The NSW minister for music and the night-time economy, John Graham, described Splendour's cancellation as "devastating news."

"The festival industry is under extreme pressure, and I am deeply worried about the health of the festival scene here in NSW," Graham said.

"The NSW Government offered financial support to help the event proceed this year. We will continue to work with them and hope to see them return next year."

The ballooning cost of music festival tickets due to inflation and rising insurance premiums have been blamed for the demise.

Greens MP and music spokesperson, Cate Faehrmann, called on the government to support festivals or risk losing them completely for a generation of music fans.

"The price of tickets are just too high for many young people in this cost-of-living crisis," Faehrmann said.

"Over the last few years the live music industry in NSW has been dealt blow after blow.

"The fact that one of Australia's biggest music festivals is unable to sustain itself any longer should be a massive warning to the NSW Government that without urgent intervention, live music as we know and love it, will never recover."

Splendour In The Grass only released an official statement hours after the cancellation became public on Wednesday.

"We know there were many fans excited for this year's line-up and all the great artists planning to join us, but due to unexpected events we'll be taking the year off," the statement said.

All ticket-holders will be refunded automatically.