TODAY, 7:33pm: For his part, GM Chris Antonetti says that he met with Masterson and all are in agreement "to table discussions on a multi-year contract and potentially revisit it down the road," reports MLB.com's Jordan Bastian. Antonetti says that he prefers not to hold discussions during the season, while Masterson says (via a tweet from Bastian) that he would be open to doing so.
Addressing the team's assessment of Masterson's market value, Antonetti said that the Bailey contract was just one data point. "We were very cognizant of that contract," he explained, "but there are others. I feel like we made an earnest attempt to get something done and offered Justin a contract that was fair relative to the market." Weighing heavily for Cleveland, though, was its future commitments and expected increases in arbitration payouts. "That's a consideration," said Antonetti. "I think the thing that we want, and I know Justin wants, is to be a part of a championship-caliber team. So what we need to do is look at how we fairly compensate players, but fit them within the constructs of what we expect our payrolls will be moving forward."
6:07pm: While acknowledging that talks had broken down, Masterson did not rule out the possibility of another attempt, Paul Hoynes of the Plain Dealer reports on Twitter. "Although the doors are technically closed," said Masterson, "they all have doorknobs so you can open them again."
YESTERDAY, 9:41pm: Jon Heyman of CBS Sports reports that the Indians countered with a two-year deal and a club option at a considerably lower annual salary — roughly $14MM (Twitter link).
9:30pm: Hoynes reports that Masterson and agent Randy Rowley offered a two-year and a three-year proposal, with the two-year offer coming in at roughly $35MM and the three-year offer coming in at roughly $51MM.
8:49pm: A long-term deal between the Indians and No. 1 starter Justin Masterson seemed highly likely to materialize when reports surfaced that Masterson had proposed a three-year extension to Cleveland. However, Ken Rosenthal of FOX Sports reports that talks between the two sides have fallen through after Cleveland did not accept the three-year offer, which had an annual value under Homer Bailey's $17.5MM mark. Free agency now seems likely for Masterson, says Rosenthal (Twitter links). Paul Hoynes of the Cleveland Plain Dealer hears the same, tweeting that talks between the two sides "are over."
Masterson is already under contract for the 2014 season after agreeing to a one-year, $9.7625MM contract to avoid arbitration this offseason. A three-year extension would have bought out the 2015-17 seasons — Masterson's age-30 through age-32 seasons. The three-year term is almost certainly lower than what Masterson can expect in free agency next offseason, even if he rejects a qualifying offer.
A three-year deal worth $51-53MM seems like a reasonable price to pay for Masterson, who has turned in an ERA south of 3.50 in two of the past three seasons and established himself as one of the best ground-ball pitchers in the game. Cleveland isn't a deep-pocketed club though, and they spent at an uncharacteristic level last offseason to sign Michael Bourn and Nick Swisher to four-year commitments. It's unclear if that spending spree is related to the Masterson situation, though.
If Masterson does reach the open market next offseason, that's bad news for the likes of James Shields, Max Scherzer and Jon Lester (if Lester does not reach an extension of his own), as it would add another quality arm to the top of the free agent crop.