In the Washington theater world, January -- that dull, gray letdown after New Year's Eve -- did not behave according to form.

Normally, nothing much happens. The Christmas attractions are packed away and there's a drop in momentum while new shows are being put together. Theatergoers are reevaluating their entertainment budgets, strained by holiday expenditures. Meanwhile, it's snowing.

This January, it snowed, of course. But in addition, all hell broke loose.

The first bombshell exploded in the Folger Shakespeare Library, which abruptly announced that it would dissolve the Folger Theatre, its official resident acting company, at the end of the current season. Shortly after, the New Playwrights' Theatre, facing empty coffers and a sheaf of bills, said it would have to shut down permanently if $250,000 were not raised in 90 days. Barely a week later, Peter Sellars unveiled his plans for the American National Theater, which he was hired to establish at the Kennedy Center and which, as he envisions it, will entail a radical restructuring of the Center's theatrical activities.

Any one of those announcements would have serious ramifications on the Washington cultural scene, but all three, coming at once, signal that a major upheaval is under way.

A sizable outcry greeted the posting of a death notice for the Folger Theatre. The Shakespeare Library, which has been responsible for the annual deficits, claims the company places undue strain on its own resources and threatens its future as one of the great repositories of rare Elizabethan, Renaissance and 18th-century books. For the theater's supporters, such an explanation represents an unacceptable retreat into the ivory tower -- one that, furthermore, blithely overlooks a huge repository of good will that the acting company has generated for the library itself. While it would be premature to talk of an imminent rescue, it does seem clear that after 15 years neither the public nor the theater staff is willing to let that company go gently into the night.

The library may be willing to provide an annual subsidy of $50,000 on condition that the theater itself set up its own board of trustees and its own fund-raising mechanisms, and assume responsibility for any future deficits. The theater's artistic producer, John Neville-Andrews, maintains that he would need "a year's grace period" to implement such a scenario. Exploratory talks, as they say, are continuing.

In one sense, New Playwrights' is in an even tighter bind. Insolvency has always been its middle name. Three years ago, it issued an ultimatum, similar to last month's, although the emergency funding needed to keep the doors open then amounted to considerably less -- $86,000. NPT's board of trustees claim they are fighting a slightly different battle this time. They are not out to save the old theater, but a reinvigorated theater that they see coming into being under artistic director Arthur Bartow. Without altering NPT's emphasis on original plays, Bartow has indeed raised standards since taking over last July, but he has only a two-play record to run on. Is that sufficient to convince enough potential saviors that a meaningful future is in the making?

But it is Sellars' plans for the American National Theater that potentially carry the most far-ranging consequences -- not just for the Kennedy Center, but for the whole Washington theater community. To my knowledge, there has never been a price war in the theater. But Sellars' intention to reduce admission fees to all plays in the Eisenhower and Terrace theaters has to give pause to the other playhouses in town, which, however reluctantly, have been obliged to raise prices over the years. By making the Center's Theater Lab a home for experimental work, rebaptizing it the Free Theater and opening it without charge to the public, Sellars is throwing a challenge to the city's existing experimental groups. Above all, his eagerness to rethink the traditional ways of doing and marketing theater is bound to have a catalytic effect that extends well beyond the Center's marbled walls.

But he, too, is up against huge obstacles. The American National Theater company will require massive funding, and as yet his declaration that "we'll be rethinking the way theater is funded, too," is a less-than-concrete solution to the dilemma. For the most part, the Center's constituency and most of its big-money supporters have been of a conservative bent, culturally. Will they rally to the new regime? Is there, as Sellars believes, a large untapped audience that hitherto has stayed away, either because the price was too steep or because the fare was somehow seemed irrelevant?

Just what the theatrical landscape will look like once the dust has settled is matter for conjecture. But in each of the above cases, success or failure, survival or death, will not be decided in a void. A concerned and caring public can make a difference. And there are, I think, a few basic observations that can help guide us through this time of flux.

* Subsidy is not an indulgence. It is an incontestable fact of theatrical life these days. Orchestras and opera and dance companies have never paid for themselves, and no one thinks the worse of them. The theater, however, is still expected to pay its own way. Institutions like the Folger Theatre, New Playwrights' or the soon-to-be American National Theater are clearly labeled nonprofit. But in some quarters, "nonprofit" continues to be viewed as an expression of high moral purpose, as if the theaters in question had voluntarily opted to put themselves above such grubby matters as money. Not so. With the exception of a rapidly dwindling number of bonanzas on Broadway, there are simply no profits to be taken from the theater -- any kind of theater. A meaningful repertory will always cost more to produce than it will take in at the box office.

Sellars knows that. But he wants the public to know it, too. Lower prices may expand the size of the audience at the Center. But it will also mean that even a runaway, standing-room-only hit in the Eisenhower is guaranteed to lose money. By building that premise into the American National Theater from the start, Sellars is being utterly realistic. The dreamers are those who think that theater can pay its way in the marketplace.

* Cutting back is no solution. In commenting on the dissolution of the Folger Theatre, Werner Gundersheimer, the director of the Folger Library, allowed that he "could conceive of some kind of chamber theater" taking its place or having "small subsidized troupes coming here." Neither is an acceptable alternative to the Folger Theatre.

As it now stands, the American theater as a whole runs the risk of whittling itself right out of existence. Most of the world's great plays -- and not just Shakespeare's -- require large casts and multiple sets. It can even be argued that the grandeur of their thought and the vigor of their insights are a function of their physical scope. That very breadth is slowly being sacrificed on the altar of economics. If playwrights today do not think big, it is because they generally go unproduced when they do. Our dramatic horizons have so shrunken that the two- or three-character, one-set play is the rule; six characters and two sets now constitute an epic. Not without reason does Sellars describe most contemporary drama on Broadway "as two or three people sitting around in a living room putting out cigarettes in one another's faces."

We do not save the theater by cutting corners and doubling up actors. We merely hasten death by strangulation. Shakespeare, performed on a dime by a handful of actors, is no longer Shakespeare and unworthy of the Folger Library. In that respect, the board of trustees of New Playwrights' is thinking correctly when it says, in the words of co-vice chairman Jackson Bryer, "We could raise $100,000 and survive. Initially, that was the thought. But there is no point in merely surviving. Either we make this place much better or we close. We could scale down, but we have made the decision to scale up."

* Growth takes time -- an unpopular notion in an age of instant coffee and overnight sensations. Sellars looks on the next five years as a period of "research and development" for the American National Theater. Failures will be inevitable. Unlike the painter or the composer or the novelist, who can refine his talents in a garret, the theater makes its mistakes out in the open, where everyone can see them. Even flops can be interesting, however, when they are not born of timidity and compromise. If we want an American National Theater, we must be willing to welcome the audacity of its failures along with the boldness of its accomplishments.

The Folger and New Playwrights' have a valuable legacy of hits, but they also have a history of missteps and errors that is just as valuable. Indeed, their triumphs have been at least partially forged out of the wreckage of past mistakes. We are squandering, respectively, 15 years' and 12 years' worth of learned lessons by letting those theaters go under. As New York producer Joseph Papp has pointed out, money is really the least of it. Theaters "can't be created with money, They are wrought out of a lot of people's blood over the years. But, ironically, money can save them." Starting all over again is costly, indeed.

* Although we tend to look upon our theaters as independent entities, they are, in fact, subtly interrelated. A breakthrough at one ultimately permits a breakthrough at another. Arena Stage's spanking success last season with Caryl Churchill's "Cloud 9" did not jeopardize Horizons' subsequent production of Churchill's "Top Girls." If anything, the one whetted appetites for the second. Audiences discovering Shakespeare at the Folger are very apt to give Shaw a try at Arena.

If the American National Theater does fulfil its ambitions to explore brave new worlds at the Kennedy Center, a salutary effect will be felt all over town. Ultimately, all our theaters will find themselves with greater maneuvering room and more freedom. Understandably, some of the city's smaller theater groups feel momentarily jeopardized. But it seems to me that the National Theater -- by further popularizing and legitimizing experimental fare -- is a potential ally in the long run.

By the same token, when a theater dies, all the surviving theaters also die a little. An option has been eliminated. There is a downward shift in the psychological climate. Suddenly, less seems possible, not more. It was common a decade ago to say that Washington was fast becoming a theater town. It could just as easily turn into a town with some theaters.

* Our playhouses do more than just perpetuate plays. They bind us into a momentary community. What, after all, is theater but people coming together to examine their shared mortality? It is a socializing experience, one of the few left us. Television and the cinema can never compete, unfolding relentlessly in the dark, as they do, whether anyone is watching or not.

In many minds, closing the Folger Theatre is perceived as a direct violation of that sense of community -- hence the understandable outburst of indignation. Once largely inaccessible to the general public, the library has become over the years a popular focal point of Capitol Hill. And the change has been fostered by a group of stalwart players in doublets and hose. Even internal reports prepared by the library's various advisory committees concede that the theater has been largely instrumental in "off-setting the widely held image of the [library] as an ivory tower."

Scholarship has its exigencies, of course. "The reading room is recurrently subjected to the disruption of (necessarily) noisy rehearsals," snipes one report. But it is hard to see the library's action as less than self-centered and, if its mission is indeed the preservation and perpetuation of culture, woefully shortsighted.

Conversely, the Kennedy Center was conceived from the outset as a resource for all Americans; it just hasn't turned out that way. After a decade of well-intentioned programming, it has acquired an air of stolid propriety and slightly overdressed decorum. Going to the theater there is still an occasion, when it should be a habit. If the American National Theater manages nothing more than to shake the walls and rattle the chandeliers during its first few years of existence, it will be worth its keep.

Theaters, of course, cannot single-handedly vitalize a society. But history shows that there has rarely been a vital and dynamic society that did not have a flourishing theater at its heart.

For all that, it should be recognized that there is a natural attrition rate among theater companies, as there is among humans. Some do grow tired and moribund and outlive their purpose. If a theater's creative pulse is weak, maintaining it with an artifical support system is pointless. What is scary is that today even the healthiest of theater companies are subject to life-threatening reversals -- the smallest fluctuations in the economy, changes in public taste, appropriations cutbacks. We assume, because they sometimes inhabit impressive pieces of real estate, that they will always be with us. Without our constant concern and unflagging attention, they won't.

Under the circumstance, the advice of Dogberry, that word-mangling constable in "Much Ado About Nothing," seems appropriate. Smelling treachery in Messina, he assumes his most serious demeanor, draws himself up to his full height and counsels the ragtag night watch: "Be vigilant, I beseech you."