Investors are making a mistake by selling News Corp. (Nasdaq: NWS) at current prices.

They're ignoring the good news from Tuesday's third-quarter earnings report, choosing instead to obsess over lousy fourth-quarter projections. Revenue will fall $100 million short of last year's Q4 mark, MarketWatch reports, because News Corp.'s Twentieth Century Fox studio has too few movies headed to theaters, a disappointment after Avatar's $2.7 billion worldwide box office haul.

Avatar set a high bar, helping to lift News Corp.'s Q3 operating income from filmed entertainment by 76%. Other hits included Alvin and the Chipmunks: The Squeakquel and X-Men Origins: Wolverine, which combined netted almost $816 million in global box office receipts, reports Box Office Mojo.

Repeating successes like these isn't easy -- hence the muted expectations for Q4 and the resultant selling. Shares of News Corp. were already down 4.5% for the week through yesterday's close, and down another 1% this morning.

A better sideshow
But this is an overreaction, and it fails to acknowledge just how good News Corp.'s Q3 results were when compared to competitors.

Consider Time Warner (NYSE: TWX), which yesterday reported 5% higher revenue and a 37% gain in operating income. At News Corp., revenue improved 19%, and after backing out prior-year contributions from partially owned NDS Group, operating income rose 67%. Operating income improved in every segment other than direct broadcast satellite TV, resulting in $0.32 in per-share earnings. Wall Street had called for $0.23 in profits.

Most impressively, operating profit from newspapers and information services rose more than 350%, to $131 million. Of its fish-wraps, The Wall Street Journal did best. News Corp. said its Dow Jones unit -- the controlling segment for the Journal's operations -- improved advertising revenue by 25% and increased its circulation revenue as well. New York Times Co. (NYSE: NYT), Gannett (NYSE: GCI), and McClatchy (NYSE: MNI) haven't been as fortunate.

This last point is critical; it helps boost News Corp. chief executive Rupert Murdoch's argument that subscribers would pay for great content if Google (Nasdaq: GOOG) would stop delivering it for free.

I'm not a big fan of Murdoch's public murdering of The Big G on this point. On the other hand, as a writer, I like that there's evidence consumers will pay for content. And I love that News Corp. is winning readers and boosting ad revenue simultaneously. This, not Avatar, is the story of News Corp.'s earnings report.

Without a doubt, Murdoch owes Avatar director James Cameron flowers, candy, and a lifetime contract for the profit machine Cameron created. But advertising is the key to the media business generally and to News Corp. specifically. If ad spending keeps rallying -- and the Q3 numbers suggests it will -- so will the stock.

Is now the time to buy News Corp.? Discuss in the comments box below.