I thought it's an well known fact that Tony Wilson was actually gutted not signing The Smiths because Rob Gretton against it.
I've heard both stories, that Gretton didn't like the demo tape and that Wilson didn't like it. In Rogan's account, Wilson says he didn't sign them because he felt Factory couldn't promote them properly. He was doing The Smiths a favor. Then he mentions Gretton's dislike of the tape; Gretton was Factory's A & R man in addition to New Order's manager and co-owner of Factory.
However, I've heard Wilson say the tape was shit, and in any event, I seriously doubt Wilson was gutted. As he told Rogan, "I don't know if I'd have loved to work with him. From the beginning, I always thought I loved Steven, and that behaving like a c*** was intentional... He behaves like a stuck-up guy still, and it works a treat. If you behave like a sensitive, weird megastar, within months people think that's what you are. I think he is very difficult to work with as a manager and a record company. Yet EMI now seem happy with him and he with them, which has always surprised me. So maybe I could have worked with him, but I wouldn't have wished that on myself".
People often said Wilson was full of shit. It's very likely Wilson would have said anything to make it appear as if he passed on The Smiths, when in reality he was very upset. But, by the same token, Wilson
was full of shit, after all-- he made a lot of inexplicable and sometimes perverse choices-- and therefore I find it believable that he and Factory just didn't want to work with The Smiths. I suspect the truth lies somewhere in between. If The Smiths had been hot to sign with Factory, he'd probably have been happy to put out their records. Since they weren't, he wasn't. I think it worked out well for both sides, and Wilson probably felt that way too-- not to mention Morrissey and Marr.