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The video tutorial demonstrates how to reduce the Excel file size without deleting data. It emphasizes the importance of saving a copy of the original file before making any changes. The first step involves compressing picture sizes by selecting the picture, going to picture format, and choosing compress under adjust. Different options for compression are available, with the ability to customize settings based on intended use. An alternative method to always have compressed pictures involves adjusting settings in file options, specifically under image size and quality by discarding editing data and selecting a lower ppi.