Prequel |ˈpriːkw(ə)l| noun
A story or film containing events which precede those of an EXISTING work.
Prequel
A prequel is a literary, dramatic, or filmic work whose story precedes that of a PREVIOUS work.
No semantics here, the definition is glaringly obvious.
A prequel IS a sequel. It just so happens the events occurred before the existing/previous work.
"The Second Edition of the 20-volume Oxford English Dictionary contains full entries for 171,476 words in CURRENT use."
There is a word for everything. You don't need to make up new words for ones that already exist.
So, are the game developers/marketing staff illiterate? No, but they have assumed their target audience are.