The competition regulator will examine the dominance of major record labels, following complaints from artists that they have not shared in the spoils of the streaming revolution.

The Competition and Markets Authority (CMA) said the sector had changed "beyond recognition" as it took the first steps towards regulatory action by launching a market study.

The move comes after the culture select committee heard complaints from songwriters and musicians, who have struggled to live off the fraction of a penny they earn from each stream of their work on Spotify, Apple Music and YouTube.

Meanwhile the three major record labels, which account for more than two thirds of the global market, are reporting booming profits.

Universal Music, the biggest of the trio behind Taylor Swift, the Beatles and Adele, listed on the Amsterdam stock exchange last month at a valuation of more than £38bn. The sale delivered a cash bonus of as much as £190m for its British chief executive Sir Lucian Grainge.

In a letter to ministers, CMA chief executive Andrea Coscelli said such were the level of MPs' concerns that it decided to prioritise the investigation ahead of others.

He said: "We want to do everything we can to ensure that this sector is competitive, thriving and works in the interests of music lovers.

"Over the past decade, the music industry has evolved almost beyond recognition, with streaming now accounting for more than 80pc of all music listened to in this country. “

A market study allows the watchdog to identify competition problems ahead of tightening regulation, forcing firms to change their behaviour or moving to an in-depth investigation.

Julian Knight, the chair of the culture select committee, said: "Our investigation exposed fundamental problems within the structure of the music industry itself. This action marks a key step forward.”

It comes after the CMA warned in September that recording artists could have their negotiating power further eroded by the $430m (£312m) takeover of AWAL by Sony Music, another of the major labels. It said AWAL could have challenged the dominant distributors if it had remained an independent company. The case has now been referred to an in-depth phase 2 investigation.

Musicians and producers have endured a 41pc plunge in income since the millennium, underscoring the financial pressure heaped on artists during the age of streaming.

Artists and studio producers secured £205m from CD and vinyl sales, downloads and on-demand streaming last year, according to a report by the Intellectual Property Office.

That equals the amount they earned during 2000, which, once inflation is taken into account, shows revenues have nearly halved.

A survey also found that 62pc of artists earned £20,000 or less from music last year, with streaming royalties only accounting for 6pc of their income.