Reading on a forum over here that, apparently, Leroy isn't that well liked by the senior members of the German squad. Whether that's bullshit or not, I don't know.
Oh, maybe he has been a little big mouth somewhen. Atleast you could interpret Kroos (and no, he is not a Bayern player) interview after the Brazil match in which he said something like some of the second row talk big but did not show it with their performances - Gündogan and Sane had a really bad match then.
There could be some factors.
The system does not help Sane with a leftback that is left footed that is supposed to cover the wing whereas the left winger is better a right winger that goes inside. Kroos is the left of the midfield pairing and is mainly the playmaker on his side of the pitch so there usually aren't this isolated one-on-ones he shines in for city.
His performances were bad. He did not shine offensively, lost the ball very often and did not work well defensively.
And it is not that he is that exceptional in his club career that he is better than others so you would think about adapting the system to really accomodate him - that is more difficult in a national team than for a club. Reus has the same numbers whenever he stays fit and Müller about the whole of his career - this season despite his time with Ancelotti he might have 2 goals and an assist less - but played 500 minutes less.
The decision at the end was about him or Brandt. Both until now did not really cut it for the German team but Brandt usually was used on the right (even if I think that if Müller is sick Draxler would play) when Müller could not play. He has a higher workrate and does not lose the ball so easy. Reus and Draxler were used on the left wing.
And maybe a soft factor - last year he skipped the ConfedCup because of a nose job that could have done later on. He did big parts of his tattoo during then, too. Yes, Löw rested the established players for this second rate tournament - but Sane could have secured his place in the team with good performances there.