The Stars have signed Tyler Seguin to a bonus-laden eight-year extension that will give Dallas more financial flexibility, and more room to add and retain talent, than most would have expected.
If you’re going to make an announcement, make it in style. That’s what the Dallas Stars did Thursday, releasing a nostalgia-inducing, Super Mario-style video of an eight-bit Tyler Seguin blasting his way to an eight-year, $78.8-million contract extension. On the surface, too, it would seem as though the Stars busted out the Game Genie to get Seguin to agree to a pact with a sub-$10-million cap hit.
When you dig into the nuts and bolts of the contract, though, this is a deal that’s just as good for Seguin as it is for the Stars. And at a time when players are scoring bigger money than ever before, it makes Seguin’s one of those rare deals where both sides come out looking like the winner.
It should be said up front that there was never any question about the term. The wiggle-room on this was next to nothing. Seguin was always going to get an eight-year pact. He’s in his late prime and anything less than max-term (without a substantial increase in salary, and thus cap hit) wouldn’t have been enough to retain him. The financials, however, will catch some by surprise.
On the heels of Tavares’ seven-year, $77-million pact with the Toronto Maple Leafs, there was an assumption that Seguin would be likely to seek a similar cap hit. And why wouldn’t he? Statistically, the two have been almost indistinguishable. Over the past three seasons, despite Dallas being a lower-scoring team overall, Seguin has scored 99 goals and 223 points to Tavares’ 98-goal, 220-point output. Granted, Seguin has had the benefit of playing alongside Jamie Benn, but that’s an awfully similar rate of production from two bonafide top-line pivots. But, as sick as fans may be of hearing about it, it seems as though the tax benefits associated with playing in Texas have come to roost.
Using CapFriendly’s post-tax earnings calculator, an annual salary of $9.85 million will see Seguin net in the $6.24-million range before any additional fees. In Toronto, the same salary would net Seguin $4.61 million. As we explored last week, a contract worth $8.125-million annually for Seguin would have resulted in roughly the same take-home pay.
That’s not to say Seguin’s deal isn’t borrowing from Tavares’ in any way. While the complete breakdown hasn’t been reported yet, Sportsnet’s Elliotte Friedman indicated that $55 million of Seguin’s $78-million contract will be paid out in bonuses, including $8 million of the $9 million salary he was set to earn during the 2020-21 season, which will act as so-called lockout protection. That doesn’t make Seguin’s contract quite as bonus-laden as the one Tavares signed in Toronto — the Stars will pay out 70 percent of Seguin’s contract in bonuses, while the Maple Leafs are paying out 92 percent on Tavares’ deal — but it’s evident how one impacted the other.
And while it may be a topic for another time, it seems certain that this kind of structure — one which was first executed by Ryan O’Reilly when he inked a seven-year, $52.5-million contract with $45.5 million to be paid in bonuses — is the way of the future. Tavares’ contract and now Seguin’s sets the stage for bonus money to be used as a tool to entice free agents and retain top talents. (That is, of course, until it’s inevitably regulated in collective bargaining in the not-too-distant future.)
One can’t fault the Stars for using what they had at their disposal, be it the favorable taxes or the financial wherewithal to load up on bonuses, to reduce Seguin’s cap hit, either. Dallas is simply playing within the parameters that have been set by the current collective bargaining agreement, and the Stars are most certainly going to be able to reap the benefits from of doing so.
In managing to keep Seguin’s cap hit down, Dallas has set themselves up as well as they possibly could have for the future. Truth be told, given the Tavares comparable, the Stars may have come in somewhere in the neighborhood of $1.15 million lower than some would have expected. And while that may not be enough for much more than a hundred-thousand dollars here or there on re-signings or free agent acquisitions, every dollar counts for a team primed to be as close to the cap as Dallas.
With Seguin locked in and roughly $19 million set to come off the books next summer, the Stars are set to have upwards of $24 million in cap space, per CapFriendly. That number could increase along with a rise in the spending limit, as well, and it should give Dallas more than enough room to maneuver as Mattias Janmark, Brett Ritchie, Esa Lindell and Julius Honka enter restricted free agency next summer. It also gives the Stars the opportunity to add, which previously seemed a risky proposition when Seguin’s contract status was an unknown. There’s solid numbers to work with here, and ones that include a core of Seguin, Jamie Benn, John Klingberg and goaltender Ben Bishop locked up for at least another four seasons.
And for both Seguin and the Stars, that appears to come with the promise of brighter days ahead.