Operators of Berry's Fairgrounds may be forced to relocate interstate if new music festival licencing goes ahead under the Berejiklian government.
The changes are still being written and finalised but will come into effect on March 1 with increased safety measures which could cost organisers up to $50,000 extra.
As of Friday, more than 80,000 people had signed a petition against the change, stating "knee-jerk" regulations would cripple the industry and force events to fold or more elsewhere.
It comes as Labor announced its music policy on Friday, which would include $35 million over four years to establish a plan for contemporary music. NSW is the only mainland state without one.
Wollongong would also become a "designated music community" because of its strong music sector and value for music under the proposal.
"It'll recognise the work that's been done in the sector by a lot of people over the last few years, that has allowed Wollongong to be one of the leading lights for live music and festivals in NSW," Wollongong Labor MP Paul Scully said.
Mr Scully said it was surprising to see how far the state was lagging behind others, such as Victoria which he said received $27 million per year compared to the current $4 million for the sector.
The opposition spokesman for music and the night time economy, John Graham, said Labor does not "accept the government’s war on music".
"Labor is committing record funding to keep venues open and musicians in work," Mr Graham said.
As part of its plan, Labor would establish a new Music Industry Office to grow the state's music industry as well as new programs to help artists record and tour.
This includes rebuilding the regional touring circuit and allowing allowing festival organisers with an established record to obtain multi-year approval for their events.