South by Southwest is the world's largest music jamboree, with more than1,000 bands. Jim Carroll reports from the Texas festival

Usually, it's only the bats that come at night in such numbers in Austin, Texas. By day, thousands of Mexican free-tailed bats nestle under South Congress bridge, waiting for sundown to make their dramatic appearance and go in search of food. Their nightly exodus has even become a tourist attraction.

Last week, however, the bats played second fiddle for a couple of nights to 1,200 bands and more than 7,000 music-industry folk who made their way to the city by plane, train and clapped-out camper van for the 18th South by Southwest (SXSW) music festival. The biggest music jamboree of all right now, it attracts people for as many reasons as there are bands playing loud guitars in the 50 or so clubs on and around the city's 6th Street.

For Austin the music festival - which runs in tandem with film and interactive festivals - is a financial windfall. In a city that has lost more than 20,000 high-tech jobs since 2001, the three SXSW strands are estimated to be worth $25 million (€20 million) to the local economy, two-thirds of it from the music events.

This explains the huge local outcry, including strident editorials and columns in the Austin American-Statesman, when two members of the Latin rock band Ozomatli and their manager were arrested. Their crime? To end their show by conga-dancing with the audience onto the streets. Austin prides itself on being "the live-music capital of the world", and the behaviour of the police was seen to sully that reputation.

For the bands, an appearance at SXSW is a chance to emulate Norah Jones, The Darkness, The Polyphonic Spree, The White Stripes, the Strokes or any of the other best-selling artists who came to prominence at the festival. Last year The Darkness slept on inflatable mattresses at the home of a local computer engineer; a few months later they had sold 500,000 copes of their début album in the US. In 2002 an Indian restaurant called the Clay Oven hosted its first SXSW act - and those who turned up to see Jones are probably still talking about it.

For music-industry delegates SXSW is about the big schmooze. By day there were impassioned panel discussions about such topics as how British bands will fare in the US and the state of the retail sector, as well as keynote addresses and interviews with Little Richard, Joan Baez, Ani DiFranco, Flaming Lips frontman Wayne Coyne, former Rolling Stones manager Andrew Loog Oldham and former CBS Records boss Walter Yetnikoff. There were also plenty of opportunities to swap business cards at the trade show or do deals over cocktails at the Four Seasons or the Hilton.

The major labels may be in merger turmoil, but SXSW has always been a festival that toasts the spirit of independence, and the independent sector is probably the most robust area of the industry right now. Indeed, of the bands that played at SXSW only 80 are signed to major labels.

As delegates and locals roam from one show to another each night, there is a buzz in the air. After all, the band playing their hearts out in the Soho Lounge or B. D. Riley's tonight may be everyone's favourite new band six months from now. Those who travel to Texas every March from places as far afield as Australia, Japan and even Tashkent, in Russia - an extraordinary folk act called Uzbegim Taronasi - travel in considerable hope.

Although an appearance at SXSW is a boost for a band's ambitions, those who come expecting one Texas show alone to allow them to jump the queue to the top of the charts are usually disappointed. "The acts who get the most out of SXSW are the ones who've done their advance work, have already developed a list of people who want to see them and work to get these people to their show," says Roland Swenson, the festival's managing director.

What was noteworthy this year was the number of international trade and industry bodies that travelled with acts to SXSW, including organisations representing the music industries of Australia, New Zealand, Sweden, Norway, Finland, Belgium, Italy, Denmark and the Netherlands.

The British delegation had a particularly high profile, including music-industry bodies, regional arts councils and UK Trade & Investment, a state agency that supports British businesses abroad. Phil Patterson of the agency says its role at SXSW was to raise awareness of British music and so have an impact on the income earned by British companies and musicians abroad.

The only Irish body represented at SXSW was the Irish Music Rights Organisation, which hosted a showcase for four bands, including Turn and Stars of the City. With no representative from the Music Board of Ireland or any government department, this was yet another missed opportunity to promote Irish music abroad.

Their absence was made all the more galling by the frequent talk during the festival about the impact being made abroad by acts such as Damien Rice, The Frames and The Thrills. Given that the festival always takes in St Patrick's Day, perhaps the Government will see fit to dispatch a Minister for 2005.

But SXSW is largely about live shows, and few would have left Texas without seeing or hearing something they liked. For fans of seminal acts from times past there were shows by the re-formed Mission of Burma and Big Star to savour; J. Mascis, formerly of Dinosaur Jr, was also in town to plug his new music.

There was a chance, too, to hear the funkiest New Orleans magic imaginable at an open-air show by The Dirty Dozen Brass Band, while queues formed early for shows by Los Lonely Boys, Dwight Yoakam, Camper Van Beethoven, The Hives and The B-52's.

For fans of new music SXSW is always a bonanza. Bands that caught this writer's ear included The Secret Machines (fantastic space rock from a young Dallas three-piece), Architecture in Helsinki (mesmerising childlike symphonies and eclectic grooves from a Melbourne outfit featuring one of the very few sightings of a trombone all week) and TV on the Radio (what you'd get if Curtis Mayfield fronted the Pixies).

Of the Irish acts who played, the hotly tipped Hal were hugely disappointing, sounding more like a yellow-pack Starsailor than the intended REO Speedwagon or Supertramp. By contrast, both La Rocca, from Dublin, and The Amazing Pilots, from Belfast, impressed, the former with a string of sharp, infectious pop hooks and the latter with very strong songs that had traces of Bob Dylan and Van Morrison without aping either.

Two of the hardest-working acts at SXSW were Jamie Cullum and Joss Stone, each playing a plethora of shows at record stores and cafés in addition to their official showcases. Although Stone is already very much on the radar of the US record-buying public, Cullum is a new proposition over here. His music remains somewhat grating and irritating, but there is little doubting his ability to win over a huge audience for himself in the US.

The Detroit act Blanche also impressed. There are a lot of Jack White connections here, but their noirish country with a dollop of humour is sure to win over many when their album If We Can't Trust the Doctors . . . is released. For those reared on electronica's various shapes, the shimmering, bright pop of Telefon Tel Aviv and the delicate, fragile grooves of American Analog Set found favour.

It was also a good year for British acts. The buzz act Franz Ferdinand showed Texas why they're considered the ones most likely to do what many British acts rarely do and break through in the US. On the band's third visit to the country this year, their smart, edgy rhythms found many takers and boded well for the future.

Anyone who saw British Sea Power at Rockstars will want to see them again, because this was a live show you don't see every night of the week. Ending with 15 glorious minutes of sonic anarchy, one band member ended up hanging from the lighting rig, another walked drumming through the crowd and the guitar feedback from the others ensured nobody would forget this show - or indeed SXSW - in a hurry.