From the beginning of their career in the motion picture industry (which barely existed at this time), the Edison company quickly got a reputation for being the dirtiest motion picture business in the US, arguably in the entire world. Their promotions of boxing, belly-dancing and outright violence are responsible for all of the garbage that is filmed constantly in Hollywood today. "Cock Fight, No. 2" is a perfect example of how eager they were to make money filming violent topics. To film two cocks attacking each-other with such viciousness would be illegal and frowned upon today, yet at the time, blood-sports like these were often seen to be a form of entertainment. Keeping this in mind, it is no wonder the company chose to record such a topic on celluloid in order to promote this violence. Proof of the popularity this film gathered is obvious right in the title; to know that this film is "No. 2" automatically suggests there was a No. 1, originally titled "The Cock Fight". Furthermore, the fact that the negatives of this original short wore out from having too many copies made also tells us how much in demand for prints the Kinetoscope parlors were. Lastly, the additions of the men betting and the white background (both of which were not in the original, which had a black background) show how the company attempted to further improve their earlier efforts, in addition to keeping the demands for prints met.
Still, I do not believe that the company meant that much harm when they contributed to non-moral topics at the time. Outside the fact they knew how popular the sport was and were eager to make money off it, I believe there was another reason they chose this particular topic to shoot: the constant amount of action. I hate to go into details, but think about it: the way the two birds peck and nip at each-other so quickly, the way their wings flap around and all of that whirlwind activity. In the early motion picture business, it was not story that mattered; it was whether or not they could awe audiences with the biggest amount of action in frame. (Nowadays, of course, it's the exact opposite: now we care more about plot and suspense then we do about action onscreen). In filming a cockfight, twice the amount of action is administered to the scene then you'll see in Lumière's movies. The fact that Georges Méliès did his own version of the Cockfight idea five years later (in 1899's "A Lively Cock Fight"), where he billed it as "without doubt the liveliest and best, being full of action", also tells us there was a certain photographic value in the subject.
But I could be wrong. For all we know the people who call Edison a horrible person could be right, maybe he was just a jerk who enjoyed watching cruelty to animals. (Don't forget the company's production of "Rat Killer" from the same year). I haven't the slightest idea at all, but we can at least credit this and its predecessor to be the first films featuring live cocks.