Mr Smith insists it's no publicity stunt.
"That's what we've been accused of but I guess I'll get apology emails in October when we're not announced,'' he told Newstalk ZB's Mike Hosking this morning.
Mr Smith says been a traumatic decision to make but it's been hard selling tickets this year and hard to break even, even when the show is a sell out.
"It's basically a financial decision, we don't want to pass any more cost on to fans and we don't want to lower the standards of the show.''
Friday's show, at Mt Smart Stadium, has been hit by downsizing and sluggish ticket sales, and Mr Smith said earlier that the event was unlikely to sell out.
Headline act Kanye West was dropped from the Auckland, Adelaide and Perth events.
Acts for Friday's show include veteran grunge act Soundgarden, Kasabian and former Oasis songwriter Noel Gallagher.
Kiwi musicians also responded to the announcement last night on social networking websites.
P-Money tweeted: "BDO has been an essential event. Each year is still remembered fondly."
Fan Ricky Watson said he was "saddened and disappointed" by the announcement.
"Sadly the final nail in the coffin was dropping huge international acts. My attraction to the BDO has always been the internationals because we just don't get enough of them here in NZ. It's no surprise the festival has ended up in the state it is in but it is a disappointment to those of us who have looked forward to this tradition which it has become."
While the show's organiser Ken West was also adamant the show could not carry on in New Zealand, there was mounting speculation in social media that the announcement was a marketing strategy to boost ticket sales.
Music fans took to the internet to vent their disappointment and anger, accusing organisers of faking the "end" to make more money.
"Is this their way of improving ticket sales? Then after the event, they will say, due to popular demand we have rethought our decision and will continue it for next year," wrote one person on Trade Me.
Another wrote: "I've heard this every single year without fail. I even now expect it. It's part of their strategy to get fence sitters to buy tickets."
And a third, who had a ticket to Friday's event, said: "What a scam, they have such sh*t bands this year that this is an attempt to pull a crowd. We all know it won't be the last, they say this every year."
The Big Day Out began in Sydney in 1992 and crossed the Tasman in 1994, catching the decade's explosion in alternative rock, dance music and hip-hop.
About 15,000 people attended the first show, and crowd numbers in subsequent years often topped 40,000, especially when the event was headlined by major bands such as the Red Hot Chili Peppers and Metallica.
The event also provided a chance for on-the-rise bands to establish New Zealand fan bases.
The likes of Foo Fighters, Coldplay, the Black Eyed Peas, Kings of Leon, and Muse played the Big Day Out before they became stadium fillers.
It also provided a live launchpad for many up and coming local acts, some of who graduated to play the festival's Australian dates.
Later festivals introduced veterans such as Neil Young, Iggy Pop and Kraftwerk into the line-up, and the age of the audience also widened.
But for many, the Big Day Out will be remembered as the first big concert of their teens, a rite of passage that, after Friday, won't be there.
- additional reporting, APNZ, Newstalk ZB
