It’s more than just that (though I’m sure that’s part of it).
The thing about festivals is they have real economies of scale. For instance sponsors value getting in front of 25,000 people really highly, but they don’t value a 2,500 person festival at all. (I’m speaking general audience, in some niches a high quality small crowd is still worth money.) The portapotties get cheaper when you’re ordering however many come on one truck. The dumpster and tent companies don’t charge you any more for a 3 day rental than a one day. Etc.
So to make the business model grow you grow the festival. But soon you’re running a big security budget, so you look around for who in your area does security fit really big events. There are two firms. Ok you pick one.
Now the city wants to talk about your sanitation plan. Ok who does sanitation as a service here? OK there’s one company. Who can provide me a few 40 yd dumpsters and retrieve them on Sunday night? Ok there are like two willing to do that. Who rents large tents that has a fire permit in your city and can bring out a forklift because we’re on hard surface so we need 500lb cement anchors according to my city fire department. Ok there’s one vendor.
How do I feed 25k people? Well who does f&b for large events. Oh there are a few and they’re bidding on me. Guess I’ll go with the highest bidder among the few big national f&b firms. (My festivals are food festivals and I can handle f&b for 25,000 eaters no problem because I have run many large food truck festivals and I know who is good but most promoters cannot tell the good food operators from the bad and there are so many of both.)
So what happens is you’ve got all these pieces and you get to a level where just practical reasons as well as municipality rules make you choose between a handful of basically interchangeable vendors. And those vendors all do a good job and aren’t price gouging (they’ve got plenty of labor cost too) but they kinda all look the same.