The Cavs and Thompson have stalled in negotiations, sources told ESPN.com, with a Friday deadline for extensions approaching. Thompson is represented by Klutch Sports and James' agent and business partner Rich Paul, who has worked with Thompson since he was drafted in 2011.
James holds extreme power within the Cavs organization, and he played a key role in advising on the trade that brought Kevin Love to the team for a package that included No. 1 overall pick Andrew Wiggins over the summer.
Recently, James inserted himself into the talks with Paul client Eric Bledsoe when he encouraged the Phoenix Suns to increase their contract offer via social media. The Suns eventually did, and Paul secured a five-year, $70 million deal for Bledsoe just before training camp.
Both league executives and agents are closely watching how the Thompson talks play out as a gauge for how involved James is making himself in the team's front-office moves. James signed a one-year contract with a second-year player option over the summer to try to take advantage of a rising salary cap. But it had the ancillary effect of keeping the team a little uncomfortable about the future.
It is an annual tradition for there to be pessimism in the days leading up to the Halloween extension deadline, although it is also common for the pressure to get sides to agree by that time.
Thompson also enjoys a positive relationship with team owner Dan Gilbert, who advocated taking him in the draft three years ago when the Cavs were deciding between him and Jonas Valanciunas with the fourth overall pick. Gilbert has taken a more expansive role in personnel moves alongside general manager David Griffin since last season.
The sides both remain hopeful they will get a long-term deal with Thompson worked out this week, sources said. Thompson, a big man who specializes in offensive rebounding, is believed to be looking for something around the $12 million-per-season extensions the Denver Nuggets gave Kenneth Faried this month and the Utah Jazz gave Derrick Favors last October.
Thompson averaged 11.7 points and 9.2 rebounds last season. He started all 82 games for two consecutive seasons but will start this season as the team's first big man off the bench.
The Cavs could have James, Love and Anderson Varejao as unrestricted free agents next summer. It is one of the reasons the team is interested in getting Thompson locked up before he would hit the market as a restricted free agent. The team already signed fellow 2011 first-round pick Kyrie Irving to a five-year extension that could be worth $90 million.
The difficulty with Thompson and the Cavs mirrors extension hang-ups currently going on across the league. A root of the issue is the recently announced $24 billion media-rights deals that will vastly expand revenues, multiple league executives and agents told ESPN.com.
Although it is still unclear just how quickly the salary cap will increase over the next several years, the flood of coming money has emboldened demands from agents, sources said. Also, there is less of a fear of rolling the dice and becoming a restricted free agent after a summer when restricted players Bledsoe, Gordon Hayward and Chandler Parsons all were able to secure wealthy deals.
"There will be eight to 10 teams with large cap space next summer, and the increasing cap will force even the small-market teams to spend," one prominent official said. "It is not a bad environment to be a restricted free agent in."
"Some of the agents are viewing the new TV deal as a bullet in the gun," one general manager said. "But we all knew the TV deals were coming, it really isn't news. What would be news is if we knew how much and how fast the cap will go up and we don't yet."
Numerous teams are in extension talks with players, including Klay Thompson and the Golden State Warriors, Kawhi Leonard and the San Antonio Spurs, Ricky Rubio and the Minnesota Timberwolves, Jimmy Butler and the Chicago Bulls, Reggie Jackson and the Oklahoma City Thunder, Brandon Knight and the Milwaukee Bucks, Tobias Harris and the Orlando Magic and Kemba Walker and the Charlotte Hornets.