Now we have to argue about "culture". I'd say, movies and net series are culture and well funded and popular with the public. No need for subsidies for unpopular "theater". Also, according to that same episode of freakonomics, average income for theater goes is $270k a year. Those fans can afford to pay for their preferred entertainment. The government does not need to subsides them.
What's the median? The median excluding NYC, LA, and SF? Why is freakonomics using average? They know that's a 'manipulate public discourse' number not really a useful one, especially for something that can easily have 1 or 2 9 to 10 figure net wealth individuals in attendance.
Public subsidies to movies are common, especially in countries that are not very popular in the international market. TV channels and streaming services are often required to have a certain amount of domestic content. Even video games get public subsidies.
What you say about the average income of theater audience sounds very foreign to me. I guess that elitist theater is the only form that remains viable when it has to rely on the market and charitable donations.
When I was a kid, theater was something you went to on a school excursion every year or so. It wasn't my thing, but some of my friends got interested in it. Later in the university, our student union had a semi-professional theater group that had become a national institution. Many student organizations had hobbyist theater groups. Even students of science started one shortly after I graduated. And before my time, socialist theater used to be a big thing. But that was when socialism meant actual socialism and primarily appealed to the working class.
