The Bonami-Beckner hypercontractive inequality is a powerful tool in Fourier analysis of real-valued functions on the Boolean cube. In this paper we present a version of this inequality for matrix-valued functions on the Boolean cube. Its proof is based on a powerful inequality by Ball, Carlen, and Lieb. We also present a number of applications. First, we analyze maps that encode n classical bits into m qubits, in such a way that each set of k bits can be recovered with some probability by an appropriate measurement on the quantum encoding; we show that if m < 0.7n, then the success probability is exponentially small in k. This result may be viewed as a direct product version of Nayak's quantum random access code bound. It in turn implies strong direct product theorems for the one-way quantum communication complexity of Disjointness and other problems. Second, we prove that error-correcting codes that are locally decodable with 2 queries require length exponential in the length of the encoded string. This gives what is arguably the first "non-quantum" proof of a result originally derived by Kerenidis and de Wolf using quantum information theory.