It really bothers me that this is supposed to be about "Off-Broadway," when it is really about "Off-Off Broadway." Off-Broadway is made up of actual professional theatre organizations, including some very prestigious ones like The Public Theatre, Signature Theatre, Pearl Theatre, etc. However, OFF-OFF Broadway is indeed basically out of work actors (usually in their twenties) casting themselves in shows they produced themselves.
The skit is hilarious, but also furthers the myth that Broadway is the pinnacle of theatre, and everything else is garbage.