The National Eisteddfod - Wales' premier cultural event - is seen as being "irrelevant" and "old-fashioned", according to the author of an independent report.
Dr Robyn Lewis - accepts that changes are needed.
On Sunday the Archdruid of Wales Dr Robyn Lewis told Radio Wales that some "radical changes" would have to be made but without harming the traditions of the national event.
He felt that advertising and publicity changes could be considered and added that a panel had been appointed to look at the report and would come up with its recommendations early next year.
At a meeting in Aberystwyth leaders of the annual celebration of Welsh language and culture were told the event was failing to fulfil its full potential.
The main focus of the study, by Dr Terry Stevens, was the frail financial state of the organisation and the need for more core funding.
It follows the debts of about £180,000 collected after the 2002 festival in Pembrokeshire which added to previous losses of £317,000.
The good weather buoyed the 2003 eisteddfod held in August at Meifod near Welshpool which was hailed a success by organisers.
But at the end of the event organisers still warned of cuts next year unless an extra £100,000 was found.
At the conference the eisteddfod council decided to establish a working party to consider the implications of the report.
"You have got to remember that the eisteddfod is a cultural event held through the medium of a language which is spoken by the minority of the people of Wales," said director Elfed Roberts
"I think we are doing remarkably well as it is but we can do better.
"We need to educate the people of Wales whether they speak Welsh or not. We need to tempt them to come to the eisteddfod and taste the festival for themselves."
The report said the eisteddfod should continue to visit all parts of Wales, but should be more welcoming.
It stressed organisers should develop the festival element, adding further activities and create a festival atmosphere on its site.
The report had been commissioned by the National Eisteddfod, the Welsh Language Board, the Arts Council of Wales and the Welsh Tourist Board.
It recognised the importance the event plays in the cultural calendar and the linguistic, social and economic benefits it brings to communities.
The council is due to hear the findings of the
working party at a meeting in Aberystwyth on the last Saturday of February 2004.