Editor’s note: This is an excerpt of the New York Times’ examination of the growing web of media outlets devoted to celebrity gossip. For the full story in today’s Times, visit www.nytimes.com.

LOS ANGELES — In late July 2010, the Southampton, N.Y., police charged Michael Lohan, the father of the actress Lindsay Lohan, with physically harassing his fiancee. When the news hit on the gossip website TMZ, Lohan was at the Sunset Tower in Los Angeles, where he had been on the interview circuit discussing his daughter’s imprisonment stemming from drunken driving charges.

Michael Lohan was hardly morose about his own legal troubles. His hotel room and the hallway outside it buzzed with giddy dealmaking as he and his entourage conducted business with the door open. It could all be overheard by passers-by — or, by coincidence, a New York Times reporter staying in the room across the way.

An associate of Lohan’s ran through the plan: Ignite a bidding war between TMZ and its rival website Radar for Lohan’s side of the story and for embarrassing recordings he claimed to have of his fiancee, Kate Major. “What you have to do is monetize this,” the associate said, adding, “What you want is to make them pay for that exclusivity.”

Sure enough, Radar went on to post four “exclusives” quoting Lohan denying the charges and threatening to release tapes of Major.

This is how it works in the new world of round-the-clock gossip, where even a B-list celebrity’s tangle with the law can be spun into easy money, feeding the public’s seemingly bottomless appetite for dirt about the famous.

A growing constellation of websites, magazines and television programs serve it up minute by minute, creating a river of cash for secrets of the stars, or near-stars. An analysis of advertising estimates from those outlets shows that the revenue stream now tops more than $3 billion annually. This business doesn’t always comport with state and federal law, let alone those of family or friendship.

Now there is a growing effort to stop the flow of private information. In the past few years, a federal Department of Justice team in Los Angeles has conducted a wide-ranging investigation into illegal leaks of celebrity health records and other confidential files, according to officials involved. Working in secret, they have plumbed cases involving Tiger Woods, Britney Spears and Farrah Fawcett, among others.

Feeding the machine

Increasingly, celebrities are not just victims. With only so many big-time personalities in rehab, facing indictment or in public crack-up mode a la Charlie Sheen, a raft of reality stars, former reality stars and would-be reality stars have filled the breach with attention-grabbing antics of their own.

In this overheated gossip marketplace, where the need for fresh fodder routinely turns bad behavior into “news,” the Lohans are prototypes of new Hollywood characters — celebrities famous for being infamous.

Lindsay Lohan’s lawyer, Shawn Chapman Holley, who served on O.J. Simpson’s defense team, said the media circus surrounding Simpson’s murder trial was quaint in comparison. “There’s this unbelievable hunger for a constant flow of information about these people,” he said. “So everybody has to feed this machine all the time.”

Often, that ends up being Lohan’s father. When asked in an interview about his attempt to “monetize” his harassment charge last summer, Michael Lohan answered, “You have to.”

Dawn Holland, a $22,000-a-year worker at the Betty Ford Center, has a similar explanation.

The drug and alcohol addiction treatment center, tucked away in Rancho Mirage, Calif., some 120 miles east of L.A., takes its patients’ privacy seriously. In its nearly 30-year history, the center had never lost control of a patient file — until it brushed up against the Lindsay Lohan story.

Lohan was sent there last fall as part of her sentence for violating probation on a drunken driving case. One night when Holland tried to administer a breathalyzer test, Lohan refused and threw a phone at her, Holland alleged in an internal report, resulting in a criminal investigation. That report, part of Lohan’s confidential file, wound up on TMZ.

Holland admitted in an interview with Radar that TMZ had paid her at least $10,000, which drew the interest of the federal investigators. Holland has said TMZ paid the money through a bank account belonging to her lawyer, Keith Davidson, who has other clients who have appeared on TMZ. Holland said Davidson told her he learned about her case from people at the site.

“If I could turn back the hands of time, I would not have done it,” she said.