No. The paragraph as a whole refers to the "outputs" of vast troves of copyrighted work.
Disk size is irrelevant. If you lossy-compress a copyrighted bitmap image to small JPEG image and then sell the JPEG image, it's still copyright infringement.
Disk size is irrelevant. If you lossy-compress a copyrighted bitmap image to small JPEG image and then sell the JPEG image, it's still copyright infringement.