This question is purely from ignorance on the subject.
Why would anyone spending this type of money, want a smaller S35 sensor over a true FF sensor (or larger)?
I mean, FF is not some objective measure of quality or value. For me as a cinematographer, S35 tends to be more flexible in that I have access to a greater number of lenses suited for cinema use (arri ultra and master primes, cooke s4's, angeneuix zooms, etc. etc.) I guess there's nothing inherent to FF that makes it "better" for video use than S35. It has a "look" that you can match by adjusting f stop and focal length, and right now, Canon's FF mirrorless sensors don't match the dynamic range of their dual gain sensor in the C70/C300 Mark III. So until they catch up in that regard, they'll always be C cams on my shoots.
That might well be true, but it is also true that times and technology change, iMax has been a bigger ‘standard’ for decades too but the cost of 70mm film held it back. Now bigger than s35 sensors are cheap and readily available so the underlying benefits of larger sensors/capture area are more apparent to more people at a price they can afford.
The ‘standard’ size of a tv has grown from 22” to 50” in the last 25 years yet viewing distances have not grown, meanwhile movie attendance has been decimated in the last year. 4K will become the norm as 5G proliferates and these all push resolution and capture sensor size to new limits.
But what are the underlying benefits? How do they outweigh Super 35? Wider? Not inherently a benefit - get a wider lens to match FOV. Shallower? Not inherently a benefit, not something you can't compensate for with f stop adjustments (except for the extreme ends, which is a place I rarely venture).
Of the reasons I've heard that I've actually found convincing, none of them are entirely compelling either. Higher resolution with the same pixel pitch? Ok now we're getting somewhere! I don't need higher than 4K yet, so not quite relevant, but I am happy that those options are being developed and are already available. But again, doesn't feel like an inherent benefit. Just a tool that exists that can be useful. Finer noise patterns? Sure. Although Roger Deakins shot 1917 at 1600 ASA to get more noise in the image. So for some people that might not be an inherent benefit. What about getting the same FOV but with less distortion because you're using a longer focal length? Great! If that's what you want. I personally like the distortion I get from a 32mm on S35 though.
A smaller sensor is always a compromise. You never get worse than smaller with bigger and normally at least one stop better!
It really isn't. Why balk at a generalization with another generalization?