I wouldn't quite say that. Dummy cameras give petty criminals a risk they hedge their actions against. Security theater would be telling people they can feel safe from personal injury because of said cameras. Someone else put it succinctly: Surveillance is not Security.

But unlike, say, extensive airport screening procedures, it's fairly easy to test if dummy CCTV cameras have an impact on crime rates.

I don't know if such a study has been done, but if it works and impacts the intended endpoints, it isn't really theatre.

More panopticon, maybe?

No, 'Security Theater' is for when you perform a bunch of actions to make people 'feel' safer without actually making them safer. We accuse airport security screening of being security theater because it is unlikely to be effective against a targeted attack, the very failure mode that the policies were instituted to prevent.

In this case, however, the intended targets are presumably crimes of opportunity, not exhaustively preplanned crimes. For these, the threat of "you're being watched, and if you do something, we'll see it" is probably sufficient. Also they provide low grade confrontation situations to be defused by someone pointing to the camera and saying "There's a camera monitoring this".

Does the security need improving?

What about paying people to provide security services?

Eyewitnesses might not be foolproof, but they're better than a cost effective dummy camera after a murder has taken place.

I don't think the murderer in this case was deterred at all, perhaps an intimidating rent-a-cop would have allowed the murder to occur near a working security camera where the police could have gathered useful information about the crime.