Vivid Sydney has been hit by a double backlash after dozens of drones plunged into Darling Harbour and a separate 'sexualised' projection display sparked complaints from attendees who claimed it was inappropriate for a family-friendly event.

Monday's 9.30pm Star-Bound drone show was cancelled after 'unforeseen technical difficulties' during the 7.30pm performance caused drones to fall from the sky. 

Vivid also faced criticism over a separate projection display at Circular Quay, with some attendees claiming performers in revealing outfits were unsuitable for children to watch.

Lenny Sinclair, a two-time Australian Kickboxing Champion, was enjoying the annual event on Monday when he spotted the display of scantily-clad dancers, with one thrusting during the performance that was projected on the Museum of Contemporary Art Australia building. 

'Multiple men and women half-naked are sexualised on this building, while there's family and children around... yuck,' he wrote in the caption. 

Viewers on social media were shocked by the video, and agreed that it was inappropriate.

'It's f***ing disgusting that we promote this s*** and in front of children,' a user said.

Another added: 'Imagine having to explain this to your kids.' 

The criticism comes as Vivid continues dealing with the fallout from the drone malfunction, with shows scheduled for Tuesday and Wednesday nights cancelled while a technical and safety review is carried out. 

'We apologise for the disappointment and inconvenience caused to attendees,' a Vivid Sydney spokesperson said.

'Public safety is always the number one priority and a full assessment is now underway with the specialist operators and relevant government agencies advising on next steps.'

A worker at Darling Harbour told ABC Local Radio there appeared to be a 'cascading failure of the drones'.

'Everything seemed normal and then very shortly after that first image was displayed, on the southern side of Cockle Bay you started seeing drones dropping in the water,' he said.

The drone show's operator, Sky Magic, said 89 drones landed in the waters of Cockle Bay, and said the incident was caused by an unforeseen change in the radio frequency environment. 

'No vehicle escaped the safety boundary of the show parameters and the reaction of the pilots and crew were timely and appropriate in accordance with our operations manual and processes,' the company said.

'Some vehicles during the emergency landing phase encountered the geofence boundary and shut down to preserve the safety zone, resulting in them falling into the water.'