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In this video tutorial, the presenter demonstrates how to reduce file size by compressing images. This can be done by selecting a picture, clicking on the picture format tab, choosing to compress pictures at high fidelity, deleting cropped areas, and selecting to compress either the selected picture or all pictures. Alternatively, file compression can be done by clicking on file, compressing pictures, and automatically compressing all pictures in the file. After compressing images, remember to save changes to see the reduction in file size.