The Competition and Markets Authority (CMA) said more than 80% of recorded music was now listened to via streaming, with more than 138 billion streams in the UK last year.
MPs had demanded a "complete reset" of the industry, amid "pitiful returns" for artists.
They had called for the CMA to look into the power of the major players.
Although the primary focus of the report was on consumers, the watchdog found a small number of high-profile artists enjoyed most of the financial success while the majority made no substantial earnings.
CMA interim chief executive Sarah Cardell said: "For many artists, it is just as tough as it has always been - and many feel that they are not getting a fair deal."
But the report notes streaming has made it easier not only for listeners to access music but also for artists to record and share it.