The popular city centre event attracts more than 300,000 people each year over the August Bank Holiday weekend.
But Liverpool’s Mayor Joe Anderson said that a combination of high costs and a wish to “freshen up” the city’s music calendar meant that the festival could not continue as it had for the last 20 years.
He said: “We have been looking at the best option for the festival since 2010.
“In previous years it has been criticised.
“Each year I would come in to find dozens of emails from families saying that they had been put off going in future because they had witnessed people fighting or vomiting or even fouling the streets.
“Looking at the financial settlement from the government and also thinking about how to get the best value for money we wanted to find a way of carrying on all the best bits of the Mathew Street Festival.
“We want to keep the carnival atmosphere but we want to get away from that drunken culture.
“It was hugely disappointing last year to see the number of people – particularly young people – who were drinking too much at the festival.
“It was clear that we needed to do something new and protecting the free element was at the heart of that.”
The new festival – to be called The Liverpool International Music Festival – will see four days of events including a concert from the Royal Liverpool Philharmonic Orchestra in Sefton Park and Beatles influenced outdoor stages on the Pier Head.
Running costs will be around 40% lower than the old festival.
Mayor Anderson said: “The events that we put on will be free and they will be suited to a more family-friendly audience. For us it’s about taking the best of what we had at Mathew Street and building on that.
“It will still be Europe’s biggest annual free city centre music festival, it will still attract audiences to the city, but we hope that it will also look at more different types of music."
“Yes, there will still be tribute bands but there will be much more than that too. It will have The Beatles at its heart because that brings in thousands of people to the city every year. But it will also have people picnicking under the stars watching Vasily Petrenko.
“It will have stages on our waterfront with all kinds of music.
“It may have paid-for events too. We are in talks with the ECHO arena and if they want to put on a show at that time, then we can bring that into it.
“The Mathew Street Festival was never ours. It wasn’t started by the council. It was something that we supported – we provided financial help, we put in the money for the security, the road closures, the toilets. But no-one here ever sat down and looked at what would be the best music festival for the people of this city.
“Now we have gone back to the drawing board and asked those questions, and started to find those solutions. I honestly believe that this will be a better festival as a result.”
Organisers hope that the new stage in Sefton Park will host concerts from the Friday to the Monday.
Claire McColgan, council director of culture, said: “The new stage in Sefton Park will be part of an infrastructure that allows us to put on events like Africa Oye too. Our aim is to have a space that can be used more easily and bring in more events to our beautiful parks.
“At the same time we are looking at ways to feature more up and coming talent, to focus on the great new bands coming out of the city and around the country.
“In recent years the fringe has thrived and we want to give that a real boost. We will be funding a festival programme that businesses can include their events in. When that comes out in May we see it as being like the Edinburgh Festival – you can look through a packed programme of all the events and choose what you want to see from all the venues. Rather than limiting what is on offer it’s actually a way of having more going on that appeals to lots of different audiences.”
The International Beatle Week, organised by Cavern City Tours, will still take place. Organiser Bill Heckle said: “The old format of the Mathew Street Music Festival has been totally outgrown.
“Its legacy is the Liverpool International Music Festival which will be a more mature and all inclusive event fully representing Liverpool’s vibrant music scene.”
As well as the stage in Sefton Park it is hoped that the festival could grow in future years. Cllr Wendy Simon, Liverpool Council’s cabinet member for culture and tourism, said: “Our parks are one of our greatest assets and to see them used as part of this new festival is a hugely exciting thing. We saw with the Sea Odyssey that people who visited Stanley Park realised what a great space it is and many have gone back since. We would love to see the festival expand and have stages across a number of our open spaces.”