The Edinburgh Festival begins in a few days. Or in little over a fortnight. Or in three, four or five weeks. In fact, depending on which Edinburgh festival you mean, it may already have started. The website www.edinburgh-festivals.com lists eight separate festivals occurring in the city now and in the near future. They include the International Festival - with Sir Simon Rattle conducting the Berlin Philharmonic and Sir Charles Mackerras conducting all of Beethoven's nine symphonies - as well as the sprawling, ever-inventive fringe festival of independent theatre, stand-up comedy and music. There's also the jazz festival, the film festival and, over the bank holiday weekend of August 25-27, the television festival.

To cover all the summer festivals you would need to take up residence in Scotland's capital for five-and-a-half weeks. More than 1.5m tickets will be sold for the various events and around £125m will be generated for the city. By comparison, Manchester city council's estimate of the corresponding figure when that city hosted the 2002 Commonwealth Games was a mere £22m. Edinburgh's base population of about 450,000 is estimated to swell by as many again each August.

It is 60 years since the foundation of the Edinburgh International Festival (the "proper" Festival) in 1947, in a spirit of postwar idealism to "provide a period of flowering of the human spirit". That first festival featured an opera from its founding director Rudolf Bing's base at Glyndebourne, performances of Shakespeare and Molière and concerts by the Royal Liverpool Philharmonic and Manchester's Hallé Orchestra. It kept within its estimated deficit of £20,000, and even then found itself augmented by eight small theatre companies performing on what had not yet been dubbed the fringe.

Today, the picture has changed out of all recognition. Not only has Edinburgh ballooned to its current size but more cities around the world realise that culture is big business and are using cultural events to generate income, to act as flagships for more comprehensive regeneration programmes and to raise their profiles. From Cape Town to Adelaide, from Dubai to Montreal, cities are turning to arts festivals to boost tourist numbers and civic prestige. (Indeed, Montreal boasts more "festival days" each year than there are days in the year.) Edinburgh faces increased competition in the UK too. Liverpool will be the 2008 European City of Culture. The Manchester International Festival, under the directorship of innovative programmer Alex Poots, plans to concentrate on new and original work when it makes its debut next year. London, of course, will host the 2012 Olympics.

Never mind the next few weeks: it's the next 12 months that may be among the most decisive in Edinburgh's cultural history.

For a start, there are a number of changes at the helms of the various festivals. By 2007, the Edinburgh Military Tattoo will have acquired a new chief executive and producer, Major-General Euan Loudon; Hannah McGill will have taken over as artistic director of Edinburgh International Film Festival; and Jonathan Mills will have succeeded Sir Brian McMaster as director of the main International Festival. It is hard to say what changes the new directors may bring. Indeed, there has been some pessimism that too little might change. There have been fears in some quarters that the International Festival, far stronger on the musical than the theatrical side under McMaster, may continue this imbalance under Mills, himself a composer.

A recent study commissioned by the Scottish Arts Council, the inter-festival liaison organisation Festivals Edinburgh, and various public bodies, entitled "Thundering Hooves: Maintaining The Global Competitive Edge of Edinburgh's Festivals", compares Edinburgh's festival situation with various competitor cities in Britain and round the world.

The report suggests that Edinburgh is exceptionally strong in what it calls the "Festival Offer": the number of events available and the range of appeal they have. It also concludes that the relatively small size of Edinburgh compared with many of its competitors is a plus, keeping things on a more manageable human scale and imbuing the city as a whole with a distinct festival atmosphere rather than losing it in a metropolitan sprawl. Anthony Alderson, new director of the fringe's biggest venue complex, the Pleasance, puts it succinctly: "Edinburgh has such a clear soul to it."

But the report warns that a greater amount of collaborative planning is called for, both between the various Edinburgh festivals and with the public sector. In particular, it advocates an increase in public funding from the current level of 2.8 per cent - and falling - of Edinburgh city council's total budget, to a level more like the 4 per cent received by competitor cities. The report adds that the world in general has become much more "festivalised": the Middle East and Asia in particular are waking up to the possibilities.

Moreover, international musical and theatrical tours are now much more common. You don't need to travel to a big festival at a particular time of year to see top-flight talent from a distant part of the world. For all its history and celebrity, Edinburgh needs to beware of being taken for granted. "I read an article about the 50 big festivals happening this summer," says Alderson, "and was staggered that the Edinburgh fringe wasn't mentioned."

The paradox is that while some warn of the danger from other cities' growing festivals, others worry that the Edinburgh fringe's problem in particular is that it has become unmanageably large. Last year I saw more than 120 shows, sometimes as many as eight a day (I now know that seven is my limit), and that barely made a dent in the more than 1,800 shows on the fringe alone. (There are, inevitably, even more this year.)

In 1998, the fringe uncoupled its scheduling from that of the International Festival and has since begun and ended a week earlier, to avoid a falling-off of audience numbers and a shortage of beds when students return to college in Edinburgh at the end of August. At first some suspected an attempt to bounce the International Festival intofollowing suit but the latter's counter-argument was that theperformance and holiday schedules of leading European performing arts companies meant that moving earlier would radically reduce the amount of bookable talent.

To some this seemed a matter of machismo, with each festival attempting to prove it was the real powerhouse of the Edinburgh season. Though the sense of dispute has largely dissipated, it served to fuel another problem Edinburgh faces: that of festival fatigue in the media.

As the festival has grown, so those reporting on it have given up any hope of comprehensive coverage, with broadcast media in particular contracting to token, "flavour-of" coverage. During an interval conversation in London last week, I listened to a number of my theatre-reviewing colleagues discussing how little time each would be spending in Edinburgh: generally, a few brief visits to cover the International Festival events and possibly some flagship fringe shows. Then one turned to me and said, with a mixture of incomprehension and pity: "But you actually like being up there, don't you?"

The "Thundering Hooves" report recognises this issue. It notes that newly-created rival events round the world will have a buzz to them. The danger, according to the report, is that "the media splash around these new festivals attracts the attention of artists who see an opportunity to get more publicity and coverage. With the loss of leading staff and artists, Edinburgh is viewed as losing its edge, becoming 'a well-known has-been'."

Fortunately, nobody seems to have told the punters. It has long been common knowledge that the average number of people in a fringe audience is three - common, but false. In 2005, there were just over 50 spectators per performance, says Paul Gudgin, the fringe's director. The fringe sells nearly twice as many tickets as it did 10 years ago.

New fringe venues have been created. The network of dank but surprisingly serviceable subterranean chambers beneath George IV Bridge, first opened up as a venue a decade ago, has since made a name for itself as the Underbelly and is now one of the big four fringe venues along with the Pleasance, Assembly Rooms and Gilded Balloon. This year it also offers the striking symbol of a new space, the Udderbelly, a huge, inflatable, upside-down-cow-shaped venue in Bristo Square. This year's laurel for most unusual venue goes to a production of A Midsummer Night's Dream - up a tree.

This variety and outrageousness are Edinburgh's strengths. And while there is no room for complacency, it will take some effort for the more slickly-marketed new festivals to match it.

MY FESTIVAL-GOING HIGHLIGHTS

*Seeing a young man at midnight in an airless attic, dressed entirely in blue and white tea towels, claiming to be Mother Teresa of Calcutta. He handled the audience magnificently, I wrote a rave review (his first) and later discovered he was just starting out as a performer. His real name, Graham Norton.

*Suddenly understanding why there were so many pop-kitsch artefacts in the flat where our student company was dossing down in the mid-1980s. Our host was the vocalist with camp-punk legends The Rezillos.

*A show entitled ‘Taboo’, which turned out to be an attention-grabbing scam by press huckster extraordinaire Mark Borkowski. Since normal admission was free and the press always had to get in cheaper, we were each given £10 and forbidden entry unless we had drunk at least two complimentary high-strength beers. I can’t remember much more about it . . .

*My own appearance at notorious bear pit Late’n’Live in 1997, the year I performed a solo show on the fringe about being a critic in Edinburgh. I thought I was going to jam with the band. Comedian Dylan Moran knew before I did that I’d be doing a short comedy set and went round the local pubs assembling a posse of comedians to bay for my blood. The most violent night of my life (and I grew up in Belfast at the height of the Troubles) was caught on camera by a TV documentary team and screened unedited, all two minutes and 43 agonising seconds of it.

*The finest sardonic one-line review I’ve ever encountered, by one of my then colleagues: “Lovers of Latvian avant-garde drama will love this Latvian avant-garde drama.” Some of us have been using variations on it ever since.

*My first encounter with Polish theatre was seeing Janus Wisniewski’s Teatr Nowy company performing ‘The End Of Europe’ in 1985. Claustrophobic and mind-blowingly intense, I saw it five times.

*Conducting a bizarre, clandestine festival-courtship while we were both in a drunken crowd during one of comedian Arthur Smith’s 2am Alternative Walking Tours of the Royal Mile. Several years later, a police incident at another of Smith’s tours led to my appearance as witness for the defence in the case of the Queen v comedian Simon Munnery. We got him acquitted.

*Playing improvised balalaika while sitting in the audience on the night when faithfully ramshackle tribute act the Gonzo Dog-Do Bar Band were joined onstage by original Bonzo Dog Doo-Dah Band member Neil Innes. He paid them the ultimate accolade: “You guys are nearly as bad as we were!”

*The year a group of us rigged a critics’ award vote so that the accolade went to a 3am slide show projected on a side street wall in protest against the city council knocking an hour off late drinks licensing.

* My first-day ritual every year: to walk across the Meadows into town with Primal Scream’s “Movin’ On Up” playing on my personal stereo. It confirms that I’m back in my spiritual home and ready for all the excitement and unpredictability that the world’s biggest arts beano can lob at me.