Uninspired, just throwing characters around.
There didn't seem to be much of a purpose to this movie besides the violence, and the violence itself was rather repetitive and uninspiring. They beat on each other a bunch, and then one guy wins probably because the maker flipped a coin to decide so. The violence had little planning behind it, and the whole tournament was just an excuse to have a bunch of sprites beat on each other for a while.
If you're going ahead with the next one, I would recommend putting more focus on each fight, giving us a reason why someone won, rather than just the fight ending randomly. I think that's why so many people are complaining about their favorite character losing; because it just happened randomly that way.
At the very least, maybe try to introduce each character's name when they appear; I didn't know who 1/3 the characters were.