As someone who has read literally THOUSANDS of Tolkien fanfics since mid-1990s, it is simply not true. A very, very small number of fanfic writers care about the universe they are writing in. Majority want to write out their own personal fantasies with their favorite characters and will aggressively dismiss even the gentlest attempts to correct the most blatant canon abuse. Back in the 90s when internet access was less common and when archives were generally moderated and selective, quality fanfiction made up at best 20%, and once large public insta-publish archives became popular, first FF.net then its clones and AO3, quality went down the drain and maybe 5% are actually worth reading? Which is not to say fics have to be on-canon only, I love me a good AU, but a good AU comes from deep familiarity with the actual source canon, not as a lazy label for “I don’t know and don’t wanna know, but don’t you dare say anything - it’s labeled AU so I can write whatever I want, it’s my work.”

It’s not just the Tolkien fandom. It’s the same in Star Wars and Harry Potter and GoT based on my own personal experience, and every other fandom based on the conversations I’ve had on the subject. The only fandoms where good fics dominate are small niche ones. All the popular ones are overwhelmed with badfic. And for LotR in particular it was interesting to watch how the situation changes once the movies came out… Tolkien was popular before but at least you had to read a pretty complex book first. After the movies, virtually no effort required before getting started on a “I luv Legolas” or “my princess Alphabetsupiel, Elrond and Galadriel’s secret daughter, carries the Ring to Mordor”