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As the heavens opened during the opening morning of this year's Glastonbury Festival, thousands of sodden revellers were relieved to see copies of The Guardian being handed out.

Not only did the paper come in handy to soak up water from tents and shoes, but it did service as a makeshift umbrella until the storm passed and the event could finally get underway.

Should The Guardian's marketing team have worried that no-one read a single word? Probably not. The newspaper had added value to the festival experience before the first band went on stage.

Brand sponsorship is a burgeoning feature of the live music festival scene. Glastonbury, the V Festival, The Big Chill or the rock-fest Download give brands access to their often-cynical target markets in a closed and fun environment. But despite the quantities of water involved, it isn't all plain sailing for brands.

For a start, promoters are nervous of taking on too much commercial activity in case they alienate the people they're trying to attract. It is all too easy to aggravate your target group with too much in-your-face branding.

"A few years ago, negotiating in this market was difficult because promoters didn't want their events to be smothered by cheesy branding," Mark Whelan, the creative director at the consultancy Cake, whose clients include events such as the V Festival and sponsor brands such as Carling, says. But he adds: "The commercial reality is that these festivals are expensive events to put on."

The V Festival director, Bob Angus, says sponsorship revenue from advertisers such as Volvic, JJB and Channel 4 accounts for around 10 per cent of income. But he'd be happy to see that figure grow. "Festivals are on the social calendar these days and we are reacting to that. We wouldn't mind having more brands involved but we need ideas that bring something different to the experience," he insists.

Orange's partnerships director, Julian Diment, says it is getting easier to work with festival promoters. "Over the years, we have had to evolve and listen to what festivals wanted because they can be very cynical. Today the organisers understand that music fans are used to seeing brands at festivals," he says.

Brands and their agencies constantly worry about upsetting the swelling numbers of festival-goers, but how do the bands performing view the commercial interest in events? Steven Howard, the former head of Zomba Music and now the managing director of the artist management company Taking Care of Business, represents acts such as the urban artist Sef and Roxy Music, who performed at this year's Nokia Isle of Wight Festival. He says his clients are benefiting from brand involvement in live music.

"Brand tie-ins provide an additional revenue stream for festival promoters, so it's certainly something I factor into the contract when negotiating for one of our artists to appear," he says. "You have to balance all the components: the artist's ability to attract major sponsors and whether those brands provide a good fit with the artist's own identity and positioning in the marketplace. It is my role to protect my artist's image and avoid any conflict with an act's existing sponsorship deals."

The very fact that brand sponsorship is relatively new has advantages for brands - at present. According to Kathryn Wroath, a senior researcher at HPI Research, which studies the festival market: "Festivals are a relatively immature market for brands, so to see brands at festivals is still unexpected. It's therefore more likely that messages will get noticed."

But the growing acceptance of commercial activity at music festivals means there's already a danger that the novelty factor will wear thin.

"In communication terms, the more people who jump on the festival bandwagon, the less memorable the messaging for any one brand will be, whether it's an experiential extravaganza or not," Andy Nairn, the planning director at Miles Calcraft Briginshaw Duffy, warns.

Beyond rain and politics, there is another distinct hazard associated with festival sponsorship. Rather than being seen as hip and trendy, a sponsor can find itself being linked to the seedier side of festival life.

"Festivals are not all glamour and aspiration," Nairn warns. Binge-drinking, drug-taking revellers wallowing in effluent from over-flowing toilets does not make for a desirable brand association.

"The worlds of live music and marketing are very different. There will invariably be issues that arise on site," Natasha Kizzie, the head of entertainment at the experiential marketing company KLP, says.

Brands should be prepared to tackle negative stories in the media. "This is when an agency should really shine - through effective trouble-shooting on the ground," Kizzie adds.

And sponsoring a live event is nothing like planning a TV ad campaign: every event is unique, as is every deal. Mistakes begin to be made when sponsors fail to grasp the details of their contract with the festival promoter. The small print may bar them from giving away tickets via competitions, for example. Or there may be a clause stating that all of their activity, right down to the size of their logo on promotional material, must be signed off by the headline sponsor.

Brands that get it right will have spent months meticulously planning every angle, ensuring their activity is woven into the fabric of a festival's culture and traditions to avoid upsetting anyone. Good examples of activity include Orange's Chill and Charge tent at this year's Glastonbury, Wroath says. "It was the only telecoms network on site; it catered for a genuine need and blended with the festival experience."

So if festival sponsorship is somewhat fraught, what could be done to improve the outcomes for brands?

The head of global marketing at BMG Music Publishing, Steve Levy, says the current model of having a whole line-up of bands performing under the banner of one or more sponsors could be improved. He believes advertisers should consider associating themselves with a particular artist or style of music that will deliver a specific target audience and be seen as credible.

"The Greenpeace tent at Glastonbury sponsored acoustic and folk music, and this targeted approach could also work on a commercial level," he says. "Large brands may even be able to extend their involvement with a band at a festival beyond the event. Why not use their songs in a TV ad and on other promotional platforms?" he says.

Jo Bacon, the business development director at Rainey Kelly Campbell Roalfe/Y&R, says agencies are open to suggestions as to how they can be more creative and work more closely with artists. RKCR/Y&R this year worked with the V Festival's headline sponsor, Virgin Mobile.

"Brands can make people's lives more interesting at music festivals by tapping into what is a fun and relaxed environment. Virgin Mobile gives away free kebabs and inflatable seats. Success in this market is all about being less intrusive but more inclusive," she says.

The audience at festivals is certainly becoming more inclusive. It's no longer just unwashed students and ageing hippies. Older, well-heeled middle-class families are buying into the mud-and-music culture. As the audiences change, the brands using live music festivals will change too.

These popular bastions of counter-culture may end up playing host to financial services and car brands. Now that would be the ultimate wash-out.

SPONSORSHIP AT FESTIVALS

- Carling at Reading

Carling can't claim to have the status of years gone by, but its association with music remains strong. Carling is a Reading veteran of seven years, its 2005 activity there part of its year-long music manifesto involving venue sponsorship, negotiating pouring rights at events and hosting bespoke Carling festivals. Its Cold Beer Amnesty was arguably its cutest strategy at Reading, where it exchanged any other beer, open or not, for a nice cold Carling. The Carling Carry Out Bar, where people could buy 24-can cases to take back to their tents, was also rather popular.

- Innocent at Fruitstock

The now ubiquitous Innocent Drinks brand was born at a small jazz festival in London six years ago. The fruit smoothies brand has since developed a bespoke jazz and world music event called Fruitstock to celebrate its birthday. In August, more than 80,000 revellers gathered in Regent's Park to listen to the likes of The Whisky Cats and the London Community Gospel Choir. "This is the biggest piece of advertising we do, and it's a way to say thank you to existing Innocent fans, find new ones and raise money for charity while enjoying some funky tunes," Innocent's co-founder Richard Reed says.

- Millets at Glastonbury

Millets has long struggled to shake off its image as a stuffy brand for camping geeks. So Miles Calcraft Briginshaw Duffy took it to the nation's biggest music festival where slumming it in a leaking tent is de rigeur.

On-site shops, which sold out of wellies about an hour after the rains arrived this June, sold tents and camping equipment. "People came into contact with a high-street brand they may not have come across since they went camping with the family as kids. The communications even had a playful pop at some of the less pleasant aspects of festival life," MCBD's planning director, Andy Nairn, says.

- Nintendo at Download

Did you hear the one about the dyslexic man who walked into a bra? Or the one about the turkey who crossed the road to prove he wasn't chicken?

These gags were collected by the creative consultancy Cake for the gaming giant Nintendo during the Nintendo DS comedy talent search at the rock event Download at Donnington Park. Nintendo sponsors Channel 4's original comedy and the Bear Talent hunt was fronted by the Bo' Selecta! Bear.

Budding comedians were challenged to tell jokes to the Download crowd and the best had the chance to appear in an episode of A Bear's Tail.

- Strongbow at Isle of Wight

Eighteen pints of Strongbow were sold every minute at the Nokia Isle of Wight rock festival, where the cider brand provided a down-tempo space for revellers to relax and have a boogie. The Strongbow Rooms, created by the experiential marketing agency RPM, allowed festival-goers to enjoy dance tunes and cider from the comfort of sofas and outside decking. Towering steel girders supported a large shocking-yellow roof that could be seen from across the festival site.

- The Guardian at Glastonbury

The Guardian was the only newspaper with a presence at Glastonbury. The centre-left broadsheet published a festival guide that festival-goers could wear around their necks so they wouldn't forget which bands were playing where, and when. It also sponsored an acoustic tent with a cosy capacity of 300. The paper's marketing director, Marc Sands, says the festival allowed The Guardian to reach its core target readers in a way that was sympathetic to the event's traditions. "Glastonbury is about the music first. Any brand that rams its message down people's throats will fail," he cautions.

- Virgin Mobile at V Festival

The Virgin link with music is pretty obvious, so, as the headline sponsor of the V Festival, Virgin Mobile has to raise its game every year. For its tenth event, it advertised a live ticket giveaway across five ad breaks on Channel 4 on the eve of the festival. The ads, devised by RKCR/Y&R, featured The Cuban Brothers on location in Chelmsford. During the event, Virgin provided phone re-charging points, while an eight-strong team of Virgin Angels helped with everything from putting up tents to giving directions. Virgin Mobile has also become known among festival-goers as the brand to approach for free kebabs and inflatable chairs.