We designed a new algorithm, called matrix folding, to reduce the size of MPEG video files. This technique can also be applied to other video and non-video formats. It usually reduces file size by half and it is easily reversible without any degradation of picture quality. We built a simulator that employs matrix folding to transmit real-time video from source to destination using various bandwidths. Empirical results showed that matrix folding increased efficiency, especially with low-bandwidth transmission.