West Side Story was a famous musical.
Its plot line, revolving around a rivalry between two gangs — the Sharks and the Jets — was once used by Ted as a way to describe AFC Richmond during the early part of his tenure there. Indeed, Coach Beard agreed that the rivalry between Roy and Jamie, and the team-mates who lined up behind them, was usefully similar to what they saw developing on their team.
Ted somewhat sarcastically wondered if, as in the play, the two halves of the club could "solve their problems with a dance-off in a gymnasium", as in the play. He then immediately contradicted himself, as he remembered that, in West Side Story, two of the characters ended up "getting knifed to death at that particular event".
Though an American reference, Nate understood it instantly, even correcting Lasso's memory of the dance-off. He was able to note that the two characters "didn't die until the rumble after the event" — likely because he himself had once was an understudy for the role of "Anita" in an all-male version of the play.