He means that if Apple were to recreate the 720p files (from the master source) using the same settings they are using for the 1080p, the new 720p files would be smaller than the old 720p files, but the same quality.
At the end of the day, iTMS 1080p looks better than iTMS 720p (at least in all the videos I've tested), so complaining about the file size is pretty meaningless.