During the period 1972-1999 the number of Norwegian subsidized theatres was more than doubled, while the attendance was largely unchanged. Mainly due to new institutions established during this period, the number of performances increased by about 45%. With about the same total attendance, this means that the attendance per performance decreased by about the same percentage. The number of employees (not counting engaged persons) increased by about 60%. All in all this led to an almost trebling of both costs and public support in real terms. This study deals with possible explanations of this distressing development. Contrary to what is commonly assumed, the new theatres, with cost-disadvantages of small scale, is only part of the explanation. We provide two main explanations: The crowding out of the subsidized theatres by AV-media and other performing art institutions, like private theatres and independent performing arts groups, and by other entertainment institutions. In addition, costs have increased substantially due to slow adjustment to reduction in demand, costly arrangements to counter the crowding out effects, and institutional sclerosis. The latter seems to be due to various cost-increasing arrangements commonly found in public institutions with soft budget-constraints, as well as in private monopolies and private firms sheltered by regulations of various kinds.
