  We show that the onset of steady-state superradiance in a bad cavity laser is
preceded by a dissipative phase transition between two distinct phases of
steady-state subradiance. The transition is marked by a non-analytic behavior
of the cavity output power and the mean atomic inversion, as well as a
discontinuity in the variance of the collective atomic inversion. In
particular, for repump rates below a critical value, the cavity output power is
strongly suppressed and does not increase with the atom number, while it scales
linearly with atom number above this value. Remarkably, we find that the atoms
are in a macroscopic entangled steady state near the critical region with a
vanishing fraction of unentangled atoms in the large atom number limit.
