Arts Council Wales has received a 40% cut in funding in real terms since 2010 and Mr Rhys says he has grave concerns the sector will not exist in a decade.
He also warned the arts are at risk of becoming elitist if not properly funded.
“I doubt very much of it will be there in 10 years’ time, other than it might be in the hands of some very, very rich benefactors, and won’t be available for everybody at an affordable price,” he added.
The report has been published, Mr Rhys said, “as an advocacy tool” to fight for the sector and its funding.
In December, the Welsh government will publish its draft budget.
“The turnover of the sector and the creative industries and culture is something like £1.6bn,” Mr Rhys added.
“The employment is in the region of 40,000, which is similar to things like insurance or the financial sector, it’s similar to telecoms.
“This is a serious professional sector and it needs to be supported because it cannot go on as it’s been.”
