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Baalzamon said:

Better Translation: We wanted to, but we were being charged more than we would like to use one of the trademarked characters.

This seems to be the best translation to me. Sony wouldn't need to pay to get Kratos in MK, surely. The free boost it would give MK means, if anything, Kratos should have cost NetherRealm money, not the other way around. But, given Sony would be getting an exclusive character in the game, both sides win without any cost to either party. I'd be fairly surprised  if Sony bought exclusivity here.

On the other side, why would Epic give Gears content for free? Only for money, and I can't see NetherRealms wanting to pay. As for Master Chief? I dunno. Perhaps one or both parties thought he would be a bad fit (and he would), or perhaps MS asked for money to have him included (after all, there is a lot of Halo fans -- including the Chief could really boost sales, or so they could argue).