Storyline 3 : How to convert PNG files to JPEG

Thanks, Lauren -- yes, I did get a prompt response from a Support Engineer (as usual).   He confirmed the cause of it is when you use SL360's crop tool on a jpg -- it then gets published as a png.  He will reconfirm this with his team, and then see if this behavior should and can be changed in a future release.  Until then, the solution is, if you are doing a picture-heavy training where it matters, crop any photos you want to stay as jpgs outside of SL360. 

I also found an alternate workaround for existing projects, similar to what was mentioned above -- run the output  "/mobile" directory through PNGGauntlet, a free downloadable batch program.   It compresses the pngs up to 3/4's without noticeable degradation. 

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And here is better workaround:  continue to use the Storyline Crop tool as before, for the convenience of it.  When the client signs off on the photo, copy and paste it from the Storyline Timeline to a new file in Photoshop.  It will come in sized and cropped just as you had it in Storyline.  Export this new image out of Photoshop.  Swap it out with the old image in the Media Libary via Replace.  Result:  they all stay jpgs; 90% reduced image size in /mobile!