Caroline Ellis posted a quick Mere Opinions to Larry's site regarding Subscriptions.
She doesn't provide a link to the article she references in the Wall Street Journal but she does provide the data from the article.
She ends her entry by saying: "Anyway the research seems to indicate that the sacred cow of season subscriptions is not sustainable. I guess that means theaters might do better putting their resources into promoting single shows. (The promotion of "Three Penny Opera" at the New Rep this year comes to mind.) It's interesting. I know a lot of people would disagree with this."
Season tickets provide the steady influx of cash needed to support theatre. Marketing and banking on individual shows would destroy any hope of perpetuating new work or innovative theatre. Without subscriptions the theatre company is left to the harsh conditions of an entertainment and arts marketplace that is incredibly hostile to any risk, chance, or attempts at innovation.
Shows like Threepenny Opera, or Scapin at the New Rep can only come with a subscription audience. In an article in American Theatre about the Circle Rep (or maybe the Roundaboout?) in New York City, the artistic director said that his financial strategy is, "Screw the single ticket buyer." Basically, the philosophy is, "Why should I give you a discount, or go out of my way to please you if you are only coming to see this one show?" It is a simple strategy that comes from a confidence that you are doing good work. If the single ticket buyer likes your show they will want to see more, and the way to get discounts is to become a subscriber.
The serious problems arising from subscriptions seems to be the aging and conservative subscriber bases of some of the primary LORT theatres in the country. Younger ticket buyers are less likely to buy into a subscription series which contain 2 Warhorses, 2 Chestnuts, a "forgotten masterpiece", and maybe only one new play.