We are told that the canny British festival fan no longer bothers with domestic events because of the lure of the same bands in sunnier climes on mainland Europe. Yet this week music writers were emailed by the publicists for a major European event pleading for coverage. Why? "Ticket sales in the UK are slightly down this year, which we are surprised about." It seems the lure of abroad isn't that alluring after all. Festivals everywhere are suffering.

But British festivals appear to be suffering most. This season has seen major events dropped (The Big Chill), megafestivals cancelled (Sonisphere), new events abandoned (WOWfest, on the Isle of Wight), and other events merging (Vintage festival folded into the Wilderness festival). That's not all. One event collapsed and was abandoned after it had begun, amid a welter of recrimination and acrimony (Bloc, last weekend), others have been cancelled at late notice because the sodden ground couldn't stand a huge crowd (The Hit Factory Live, in Hyde Park in London, and M Fest in Leeds), and one festival promoter has gone into voluntary liquidation (All Tomorrow's Parties). It has not, by any stretch of the imagination, been a good year for the industry.

The Festival Calendar website lists 107 UK festivals between now and the end of September. You can see superstars, cult heroes, has-beens and never-will-bes. You can see any kind of music you want. But even now, well into our notional summer, most events – including big ones such as Latitude this weekend, Reading and Leeds, V and Bestival – still have tickets for sale. So do most of the boutique events – End of the Road, Secret Garden Party, Standon Calling. Pretty much the only events to have sold out are those appealing to a specific audience, one largely ignored by the mainstream events: all 15,000 tickets for next month's Beautiful Days festival in Cornwall have been snapped up by fans of the organisers, veteran folk-punk band the Levellers.

Simon Taffe is one of the organisers of End of the Road, a small event at Larmer Tree Gardens on the Dorset-Wiltshire border that takes place as summer ends, winning gushing reviews in the press and delighted praise from attendees. This time last year, it had sold out. This year, it hasn't – though Taffe is confident it will. He points the finger at Glastonbury's absence. "Glastonbury being on actually helps all the other festivals, because it puts people in the festival mindset," he says. "It's covered so heavily on TV that it puts festivals on the map."

Not that he blames Michael Eavis, for – as he accepts – there are countless other reasons for slow sales: the recession, the glut of music events around the Olympics, the Olympics themselves. And while the weather might seem an obvious explanation for ticket holders not turning up, it also affects advance ticket buying. "On a sunny day, we really do sell more tickets," he says. "Other promoters have said the same – people buy when it's sunny."

So: weather, recession, rival attractions – that's all as expected. But there is another factor that rarely gets talked about: the ongoing collapse of the recorded music industry. "More and more artists are looking to make up their earnings on the live scene," says Paul Scaife, MD and publisher of music industry newsletter Record of the Day. "But there's a limit to the tickets that can be sold." Increasingly, headliners are not making a "rare appearance" or their "only UK show" – festivals might just be one in a string of gigs. At Wireless festival last weekend, for example, headliners Rihanna and Drake had played extensive UK arena dates in the past year, and Rihanna had headlined the Radio 1 Hackney Weekend a fortnight before. Scarcity might fuel demand for tickets, but there's no scarcity of big name live appearances these days.

Falling music sales don't only force big acts on the road more often, though. Declining sales also mean that major labels expend less effort on supporting bands through their careers, and are more likely to drop them if success is not achieved instantly. As a result, fewer bands are breaking through to the upper echelons of festival bills, lending a stale, musty air to proceedings. Stool Pigeon magazine recently calculated that five years ago, five of the 16 headliners at the seven biggest festivals in the UK had released their first album within the previous five years. This year, the magazine noted, that figure had dropped to just two – Bon Iver and Florence + the Machine (both headline acts at Latitude this weekend, with Florence also appearing at Bestival in September). Elsewhere, Reading and Leeds offer the Cure, Foo Fighters and Kasabian, who have all been regular bill-toppers; the Stone Roses (headlining V) have just played to 225,000 people at their own Manchester shows, though their festival-mates the Killers have been away for a little while. T in the Park offered Kasabian and the Stone Roses, with Snow Patrol making up the troika. Isle of Wight offered Bruce Springsteen – just weeks before his slot at Hard Rock Calling (for his second headlining appearance at that event). Only Paul Simon performing Graceland on the final night of Hard Rock Calling counts as a surprise among the big names – and that show hasn't sold out.

"There are still headliners out there who can be unique," insists Rob da Bank, co-founder of the Association of Independent Festivals, and the organiser of Camp Bestival and Bestival (Stevie Wonder, Florence and New Order, if you're asking), "but there's so much expectation." He says the big festivals do need the biggest acts, but "the other festivals should be carving out their own niche. Medium-sized shows should be going for something different."

That point is echoed by Taffe. Knowing he doesn't have to get 50,000 people in a field at End of the Road allows him to be more creative, he says. "I try to create my own headliners – this year none of them has headlined a festival before." Even so, the pressure to stay ahead of the competition – "every year a new End of the Road/Green Man-type festival starts up" – forces him to expand, and look for bigger acts. That meant, last year, Laura Marling, Beirut and Mogwai, and a bigger outlay on fees, though the mid-five-figure sums he says he spends pale in comparison to rates commanded by headliners at the biggest events.

For all the gloom, though, consider this: in 2012, hundreds of thousands – possibly millions – will attend UK festivals. Even 25 years ago, there was Reading and Glastonbury, and nothing else. It is still the world's biggest festival market. "But it's like a gold rush," says da Bank. "The bottom 20% will drop out. But it's not the death knell of the festival industry."