Great question — answering as the UphillTech team:
Because Kung Lao is a secondary character that wasn't in the first game, which the first movie is based on, and was barely in the third game's story mode. He didn't even have a bio in the arcade game. His MK2 backstory is that he was supposed to be the Shaolin warrior champion in MK1, but declined, so Liu Kang was chosen instead. His MK3 backstory is that when Shao Khan invaded Earth, he handed Kung Lao his ass very quickly. This enraged Liu Kang into beating Shao Khan. He wasn't even a minor character in the games being adapted and is basically a pallette swap of Liu Kang on terms of background and personality. The film did not need a carbon copy of Liu Kang. They used Johnny Cage's death...
Full answer by cde: https://movies.stackexchange.com/a/65639 (CC BY-SA 4.0).
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