Saw someone on the Midway forums having the same problem. Most likely you're not long enough or too close to your opponent. I haven't played the game though so I really can't say.

I'm having the same problem. I've been playing a couple of hours now. I've only performed two fatality. Both of the Jokers! Someone please give some help. I thought it might just be me playing with that crappy Xbox360 pad.

distance, try different distances.

yeah at first i thought it was the 360 controller but i realized that i knew none of the distances. the stradegy guide mentions no distances at all.

also when using the 360 the analog stick is way easier. after i found out the distance for jokers fatality i couldn't do it with that awful dpad but got it on my first try with the analog stick.