Britain on Wednesday blocked Microsoft's US$69-billion takeover of the "Call of Duty" video games giant Activision Blizzard, arguing it would harm competition in cloud gaming.

The ruling will be appealed by both US companies – but analysts warned it could spell game over for the gigantic takeover of Activision, whose hit titles also include "Candy Crush" and "World of Warcraft".

Xbox-owner Microsoft launched its audacious bid for Activision in early 2022 to create the world's third-biggest gaming firm by revenue after China's Tencent and Japan's PlayStation maker Sony, triggering antitrust concerns.

Following its lengthy probe, the UK's Competition and Markets Authority announced Wednesday it has prevented the deal "over concerns... (it) would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come".

Both firms said they will appeal and expressed deep disappointment over Britain's decision regarding the gigantic takeover.

Activision threatened to reassess its growth plans for Britain amid chances that the deal could now be blocked elsewhere, although it has been approved in Japan.

Microsoft is seeking to further tap into booming demand for cloud services that stream gameplay over a range of devices like mobile phones and tablets.

But it already accounts for between 60 percent and 70 percent of cloud gaming services, according to a CMA analysis.

"The deal would reinforce Microsoft's advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft," it said.

"The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future."

In addition, the CMA said Microsoft's proposed remedies over cloud gaming contained "significant shortcomings" and would require further regulatory oversight instead of allowing the market to decide and the industry to shape its own future.

Microsoft's vice chair and president Brad Smith said it remained "fully committed to this acquisition and will appeal".

The decision, he said, "rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom".

Activision also slammed the regulator's verdict, arguing it showed Britain was "closed for business" for its industry, despite the UK government's insistence that it was a global hub for technology. (AFP)