[Cactus Chef]

I've seen it more frequently in other entertainment mediums I interact with. It's pretty common in videogaming modding communities...fans work on a modification to a game ("mod" for short) to recreate some kind of existing franchise in the game engine. Contrived example: "Let's create X-Men in Unity engine!" Project will build momentum, gain anticipation in the online community, then it will get the inevitable Cease & Desist letter from the IP rights holder. Half the time the project will shut down, the other half they will suddenly pivot the project to "an original IP", remove all the trademarked assets, and then reintroduce it as an original concept which is still X-Men With the Serial Numbers Filed Off, e.g. you'll now control Blaster Man, Vicious Badger, and Typhoon as your main party. The project still inevitably dies when fan anticipation dries up, because no one really cares about unknown modder's project if it doesn't even have the existing characters that drew you to the project to begin with.

DOTA 2 might be one of the few examples that maintained its momentum after rebranding from the original Warcraft 3-based mod, and there are still a few heroes where you can see the character's origins as a WC3 character, if you know what you're looking for.

Can't say I've encountered it much in literature, mostly because I tend to stay away from anything that even remotely smacks of fan fiction. I suppose I did read The Sword of Shannara, but I hesitate to even call the first one fan fiction because at least fan fiction tends to do something new plot-wise with its LOTR setting.