They usually justify it by claiming the money is needed for "administration."
No, what this is, is a scam.
If it costs them so much to administer a play contest/production they shouldn't have them.
I sometimes tell myself that NYCPlaywrights has begun to influence theatre organizations in the direction of ending requests for money but actually it seems instead organizations are just upping their submission fees. Take this one that was emailed to me, and which I promptly rejected:
Announcing the 18th annual Tennessee Chapbook Prize. 20-24 page manuscripts of short plays (or a single one-act) welcome. Winner published in Poems & Plays #18, March 2011. Author receives 50 copies. All participants receive copy of issue. Send entries (with s.a.s.e., acknowledgements, and $15.00) postmarked by November 30, 2010. To: Poems & Plays, Gaylord Brewer, Editor, English Department, Middle Tennessee State University, Murfreesboro, TN 37132.
Yes that's right, the State University of Middle Tennessee wants FIFTEEN DOLLARS. Apparently they plan to fund their entire printing run with funds from wanna-be published playwrights. Isn't stuff like this what they jack up tuitions every year for?