The organiser of the Peats Ridge music festival aimed to create an event that would show patrons how to live more sustainably. But he has failed to make the festival economically viable, leaving hundreds of performers and production crew unpaid, according to their union.

"They have to be paid what they are owed, and the alliance is determined to work with everyone affected to chase unpaid monies," said the Media, Entertainment & Arts Alliance's Mal Tulloch.

"It is simply not acceptable for them to be left in debt and struggling financially because a particular promoter fails to budget for employment costs as a priority," he added.

The festival's creative director, Matt Grant, said last week the company that operated the festival would be wound up.

He said the Peats Ridge Sustainable Arts and Music Festival, held in the Glenworth Valley north of Sydney from December 29 to January 1, had not covered costs.

The latest festival was headlined by John Butler Trio and Sharon Jones and the Dap-Kings.

"In the wake of what was an incredible 2012 Peats Ridge festival, it is with great regret that I have to announce that the income from ticket sales and other sources fell below that required to meet the costs of the event," he said.

"As a result, the festival's accountants have advised that the entity that runs the festival be wound up. We are in discussion with various parties ... and will release information as soon as it becomes available."

This is not the first time the festival has run into trouble. The 2007 event was cancelled after heavy rain turned the site to mud.

Mr Grant is the director and secretary of the company that runs the festival.

In a statement on the festival website, he claimed he had been open and transparent about the festival's financial woes.

"The process for payment for artists is a legal one, and the liquidators have been speaking to all creditors to the festival who have contacted them, as we have instructed all festival suppliers to do from the moment we were advised liquidation was the only option facing the festival," he said.

Last month, Mr Grant told Fairfax Media the festival aimed to encourage sustainable living.

"Our society has been built on consumption and disposal rather than usage and renewal," he said.

"All of us on the planet have a challenge that we need to solve together for ourselves and those that come after us.

"If our festival allows people to have the time of their life and also to take out some new understandings and behaviours on living more sustainably, then we have created some success in this mission."