I'm in the minority who thinks they won't meet in the middle because management are probably willing to gamble on them "winning" the arbitration ruling. Management are probably looking at Pyatt on a 1M/1.2M 1.1 AAV deal and seeing that Pyatt plays more minutes than Dzingel, both produced similarly in the playoffs, Pyatt wasn't scratched during the playoffs, and Dzingel's production was similar during a big chunk of the season.
Pyatt out produced Dzingel during both their last 41 games of the season with 13 points vs Dzingel's 12 while Pyatt played a harder role on the shutdown line and contributed to the PK. Dzingel basically fell of a cliff production wise to close out the season, especially during his last 30 games where he only had a few points.
If you want to get into paying for potential, maybe there's an argument to be made for Dzingel to get more of a premium, but at the end of the day he is 25 years old. This isn't a 21 year old player. Could he get a bit better? Maybe. But more likely, what you see is what you get. Now if his first half of the year ends up being more reflective of what kind of NHLer he is, fantastic, but he isn't likely to get paid in arbitration like the kind of player we saw for the first 41 games after the second half he had. At the same time, he won't get paid exactly like the player we saw in the second half because if that was the case, he wouldn't even be getting offered 1M. It'll be somewhere in the middle.
The way I see it, anything from 1.1-1.3ish would be a fair settlement on a 2 year deal. Dzingel gets a bit of a premium because he showed more than Pyatt during the start of last season and conceivably has more potential, but at the same time Pyatt was relied on more heavily, played harder minutes, was a big part of the PK, and didn't find himself scratched in favor of other players so it equals out.
There's a definite argument for locking up Dzingel 3-4 years if he is amicable to it at something around his asking price, but I think we're beyond that at this point and the discussion is really about whether it is better strategically for the Senators to go to arbitration and if not what the price would have to be to make settling a good idea. In their shoes, I would settle at 1.3M or take a chance with arbitration.